The latest outlook on the U.S. oil and gas submarkets shows decreases in RevPAR, total revenue and gross operating profit.
BROOMFIELD, Colorado—Global oil supply and demand continues to fluctuate, bringing with it constant changes in gas prices.
In 2015, oil prices dropped to as low as $45 per barrel, further depressing hotel performance in areas reliant on the energy industry. In terms of profitability, while many STR-defined U.S. submarkets saw profit growth, this was not the case in oil and gas submarkets, according to data from the 2016 HOST Almanac from HNN parent company STR.
STR has 630 U.S. hotel submarkets delineated, with 39 identified as being primarily driven by the oil and gas industry. Of those 39 submarkets, 38 contained hotels that provided HOST data for 2015 and 2014, which comprise 219 hotels in total. The HOST Program collects operating statements of more than 5,400 U.S. hotels and provides a comprehensive set of annual reports. Overall, the oil and gas submarkets saw decreases in occupancy of 4.8% and revenue per available room of 3.7% in 2015.
Total revenue, expenses and profit
In terms of total revenue and expense line items, total revenue decreased 1.9% and gross operating profit decreased 6.0% for these submarkets. In the non-oil and gas submarkets, total revenue was up 5.1% and house profit was up 7.4%.
Total departmental profits and earnings before interest, taxes, depreciation and amortization also decreased by 3% and 13%, respectively, which were both up 7% for non-oil and gas submarkets. There were slight increases in total departmental expenses and total undistributed expenses of 1% each in the oil and gas tracts.
Regarding specific line items, expenses slightly increased overall for oil and gas submarkets, while revenue decreased.
Rooms revenue for oil and gas submarkets was down 3% and room expenses had almost no change. The only significant decreases in expenses for oil and gas submarkets were in utilities—which had a decrease of 4%—and management fees, which had a decrease of 6%. Marketing fees increased by 1%.
In non-oil and gas submarkets, rooms revenue increased 5% and all selected line item expenses increased, with the exception of utilities.
Bottom five tracts
Of the 38 oil and gas submarkets reporting data, 21 reported revenue decreases and 25 saw gross operating profit decreases, with the average profit decline for these submarkets at 13.9%.
The submarket with the highest decrease in RevPAR change was Midland/Odessa, Texas, which reported a 43.2% decrease. This submarket also saw the largest decrease in house profit change with a decrease of 59.1%.
Four out of the bottom five submarkets saw direct overlap between the two sets of negative-performance tables.
Top five tracts
Not all oil and gas submarkets saw decreases in RevPAR and house profit.
The Amarillo, Texas, submarket reported a RevPAR increase of 7.4% and the Utah area submarket saw a house profit increase of 17.2%. Of the top performers, there was overlap in three out of five submarkets for RevPAR percent change and house profit increases.
Outlook on the markets
Roomnight demand for hotels in oil and gas submarkets has declined in concert with more than a year of weak oil prices, and that has had an impact on profitability. Although there are declines in overall hotel performance and roomnight demand in oil and gas submarkets, supply growth continues in these areas with more than 7,000 rooms in the final planning stage of development.
The only thing that is certain in these oil and gas submarkets is their unpredictability. Now with gas prices on the rise again, it remains unclear what profitability will look like for these areas in 2016.
* Oil and Gas Submarkets: Abilene/Central Texas Area; Amarillo, Texas; Austin Southwest/San Marcos, Texas; Bismarck, North Dakota; Buffalo/Cheektowaga, New York; Cincinnati Northwest, Ohio; Colorado East Area; Fargo, North Dakota; Houston East/Baytown, Texas; Houston North/Woodlands, Texas; Houston Northwest Freeway, Texas; Kansas Area; Katy Freeway West, Texas; Louisiana North Area; Louisiana South Area; Midland/Odessa, Texas; Montana Other Areas; New Mexico South Area; New Orleans East/Slidell, Louisiana; North Dakota Area; Ohio North Area; Ohio South Area; Oklahoma City North/West, Oklahoma; Oklahoma City Southeast, Oklahoma; Oklahoma East Area; Oklahoma West Area; Panhandle Area, Texas; Pennsylvania Central Area; Pittsburgh North Area, Pennsylvania; Pittsburgh South Area, Pennsylvania; San Antonio South, Texas; Texas East Area; Texas South Area; Texas West Area; Tulsa South/Broken Arrow, Oklahoma; Tyler/Longview, Texas; Utah Area; West Virginia North Area; York/Chambersburg, Pennsylvania.