A look at exchange rates and US ADR performance
A look at exchange rates and US ADR performance
27 MARCH 2019 7:00 AM

A 2018 analysis of global currency exchange rates against the U.S. dollar shows the impact of foreign currency on the average daily rate of U.S. hotels.

HENDERSONVILLE, Tennessee—Macroeconomic forces and interest rate fluctuations continue to influence the strength of the U.S. dollar against other currencies.

In 2018, the U.S. dollar recovered over the year and regained some strength it had shed in 2017. Especially in the later part of the year, the dollar saw an appreciation against the euro and British pound as the Brexit talks continued with no discernable outcome. The chart below shows the strength of the dollar against the euro over the year.

Of course, the foreign exchange rate has an impact on the price of a U.S. hotel room in a foreign currency. Foreign travelers not only have to contend with a higher room rate in U.S. dollars, but the percent change can be amplified as their respective currency declines against the dollar. The following chart shows the U.S. ADR in various currencies at year-end 2018.

U.S. ADR increased 2.4% over the year. The strength of the euro abated, but at year-end, rooms in the U.S. were still cheaper than they had been a year earlier. But for the other currencies we examined, U.S. room product was more expensive than it had been.

The currency fluctuations are visible when examining the long-run averages for ADR growth in selected currencies. The following chart shows how U.S. room rate growth translates into other currencies, and the exchange rate impact is clearly visible.

So, in early 2018, U.S. rooms were discounted compared to the prior year. This was especially noticeable when looking at the pound, against which the dollar had become much cheaper. In mid-2017, U.S. rooms in British pounds were around 20% more expensive than in the prior year, a trend that slowed sharply in 2018. That said, room rates decreased at a smaller and smaller pace as 2018 progressed, which implies—since the chart shows rolling 12 months data—that the monthly performance toward the end of the year actually showed some ADR increases when reported in the other currencies.

Not surprisingly when examining markets, the same pattern holds. The chart below details the ADR change in four currencies against the U.S. dollar at the end of 2018.

Overall European travelers received a discount or at least no strong price increases, whereas travelers paying Canadian dollars, Chinese yuan renminbi or Japanese yen paid more than a year ago.

It is noteworthy to point out the monthly data here as well, as the following chart for New York City room rate growth shows.

In other words, New York City rooms were available at a steep discount of more than 10% when paid for in euros in the spring of 2018. But most recently, room rates denominated in euros increased well above the U.S. average as the dollar got stronger.

We will continue to monitor the fluctuating currencies and visitation numbers to discern any impact on tourist flows as 2019 progresses and the U.S. dollar gets revalued against the other major currencies.

Jan Freitag is SVP of lodging insights at STR. Kelsey Fenerty is a research analyst at STR.

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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