STR data on U.S. hotel performance for November 2016 shows RevPAR and occupancy grew at the fastest rates this year, and demand for roomnights was surprisingly robust.
HENDERSONVILLE, Tennessee—With 2016 over, we are now looking at November data to see how the U.S. hotel industry finished the year.
Luckily November proved to be a strong month, pointing to a prolonged up cycle of RevPAR growth. New supply is growing as well, and some markets will feel the impact going forward.
Although November 2016 performance data held few surprises for the U.S. hotel industry, there is plenty to get excited about. Here are five things you need to know about November performance, courtesy of STR, HNN’s parent company.
1. Best month of the year, so far
In November, U.S. hotels posted the best monthly results yet in 2016, with revenue-per-available-room growth of 5.9%, driven by occupancy growth of 2.5%. After a slow October, when performance was driven down by the Jewish holiday shift, this really should not have come as a surprise.
But the strength of November’s demand increase (+4.2%) probably caught some analysts—including me—off guard. The last time room demand grew by more than 4% was in September 2015, when a similar calendar shift caused similar results. RevPAR has now increased for 81 consecutive months, and we do not see this pattern changing.
That said, we are now firmly in territory where a calendar shift can easily cause demand growth to be recorded below the supply increase; and then, if average daily rate grows at a pace of only 1%, we will record a monthly RevPAR decline. The 12-month moving average line of RevPAR growth is clearly trending downward.
2. Robust room demand
Actual room demand increased by 3.7 million roomnights from November 2015. This is the highest single monthly increase this year (after +3.5 million in April). A total of 91 million roomnights was sold in November. This means that in 2016, for the first time ever, the industry sold more than 100 million roomnights during eight consecutive months (March through October). So room demand, no matter what the macroeconomic headlines are, is very healthy and robust.
3. Same story on supply
Supply growth increased sequentially from 1.67% in October to +1.73% in November—basically the same story as usual. We expect the monthly uptick in supply growth to continue month after month after month.
As usual, the top 25 markets recorded the majority of the increases with supply growth of 2.6%, which was double the rest of the U.S. (+1.3%). The number of pipeline rooms under construction still stands at 183,000—approximately 30% higher than a year ago—so no let up there. It is worth pointing out that the number of rooms under construction is still well below prior peaks.
4. Business travel demand
The calendar shift probably moved some business travel demand back into November, as group demand increased 3.1% and transient demand was up 4%. ADR increases were, as usual, in the 3% range. Transient ADR was up 2.9%, and group ADR increased 3.3%. It is fair to assume that pricing increases around 3% are an indicator of things to come, and we expect as much for 2017.
What is a bit troubling is the fact that the top 25 segmentation data was noticeable weaker than the total U.S. data. Group occupancy was down 1.3%—likely a result of the strong supply growth—and transient ADR growth grew only 0.9%. Top 25 market segmentation RevPAR grew at an underwhelming 1.3% for transient and 2% for group.
5. An average year
Through the first 11 months of 2016, the results so far have been in line with expectations, as RevPAR has increased 3.3%. Except, at the beginning of the year, we had forecast—and I bet an analyst dinner on this—full-year RevPAR growth of 4%.
RevPAR growth of 3.3% with one month remaining is certainly not great when compared to 2015 (+6.2%) and 2014 (+8.2%), but keep in mind that the long-run RevPAR average growth back to 1989 is—wait for it—3.3%. So in a year when nothing seemed normal or average, 2016 will go down in the record books of the hotel industry as exactly that—average.
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