Freitag’s 5: A look at September’s contradictory data
Freitag’s 5: A look at September’s contradictory data
28 OCTOBER 2016 9:18 AM

How can the lodging industry simultaneously be growing and slowing down? STR’s Jan Freitag delves into the data for reasoning. 

HENDERSONVILLE, Tennessee—In his novel “1984,” George Orwell created the word “Doublethink,” which he defined as the act of simultaneously accepting two mutually contradictory beliefs as correct. So, consider September “National Doublethink Month.”

1. Numbers reflect shift in Jewish holidays

On the one hand, plenty data from STR, HNN’s parent company, shows that things in the United States hotel industry are slowing down. Other the other hand, we have a report that September RevPAR was up 5.6%. And, yes, both are true. The great performance—this was the highest RevPAR growth this year—really reminded me of the better days we have seen in the past few up cycles.

Of course, the results are not actually a sign of anything but a calendar shift of the Jewish holidays Rosh Hashanah and Yom Kippur out of September into October. So I would strongly caution against reading anything, good or bad, into these monthly numbers.

It is a bit uncommon to have both holidays occur in different months from year to year. The implication is that group travel is severely affected as meeting planners accommodate the working part of the 5.3 million Americans adhering to Judaism by shifting meetings away from the weeks in which the holidays occur. In some instances (such as this month), the result is a wide swing in group demand. Hence, the national numbers. Here is a quick rundown of how the Jewish holiday shift historically plays out when both holidays move by a full month.

2. With chain-scale data, don’t forget independents
Chain-scale performance showed that the positive results were reported across the board.

And now some of you are saying: “Wait a second, Jan, how come these results move the national number to 5.6%? That makes no sense.” To that, I say: “Well observed!” The short answer is, they don’t. This was really a test to see if you are paying attention. The independent chain scale RevPAR result was 7.8%. It’s a story I hit on last month and will likely bring up a few more times before the cycle ends. Independent hotels outperform the market and their chained brethren. That is what happens in this part of the cycle.

3. Group demand drives large-market growth
As expected, group demand shifted into September (likely from October), and the top 25 markets benefited. Demand grew 4.4%, well above the national average (+3.3%). Demand grew everywhere but in San Francisco (likely a group rotation or calendar issue) and Houston (because of oil).

Monthly supply growth came in at 2.3%, well above the U.S. average (+1.6%), and this is what we can expect in the future. As you may have seen in the slides before, almost one in two rooms under construction is actually located in the larger markets.

4. New year-to-date occupancy record is pleasant surprise
September YTD RevPAR growth was 3.2%, which is exactly what we predicted the year-end 2016 result would be. Since supply and demand growth were exactly equal at 1.5%, occupancy growth was nonexistent. This implies then that ADR grew 3.2%, the lowest YTD growth rate this cycle (since 2010).

Of course we set records in room supply, room demand, room revenue, ADR and RevPAR. What is nice to see—one last time, so savor it—is a new YTD occupancy record of 67.1%. Never was the September YTD occupancy higher. Yes, nitpicking matters:

  • Occupancy September YTD 2015: 67.102%
  • Occupancy September YTD 2016: 67.112%

So, print it, frame it, enjoy it, make a T-shirt, tell your kids you were there when, because it’s going to be all downhill from here (with regards to occupancy growth).

5. Slow is the new normal in US lodging industry
The quarterly results were just a reflection of the continued slowing in the U.S. lodging industry. Occupancy was flat compared to Q3 2015 and room rates were up 3.4%. Here are results in context of the last few quarters. It’s no surprise that the key performance indicators are weakening.

This article represents an interpretation of data collected by STR, parent company of HNN. Please feel free to comment or contact an editor with any questions or concerns.

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