“We expect fairly rapid average-daily-rate movement soon.”—Mark Lomanno, STR
With a piece of news many didn’t expect to hear from hotels until next year, Marriott International announced that rates at its North American hotels rose during the month of May, up 1 percent from May 2009. Revenue per available room rose 9 percent.
In a video press release June 10, Mark Woodworth, president, PKF Hospitality Research, said the company is “calling for a quicker turnaround” than previously projected, based on first-quarter results and current economic data. “The lodging industry is beyond the trough,” he said, explaining that with increases in demand and the decline in development, “average daily rate and overall profit margins will begin to recover.”
In fact, PKF sees revenue per available room up 1.7 percent at the end of 2010; up 7.8 percent by year-end 2011; and posting a record gain of 10 percent by year-end 2012.
The latest projections from STR, based in Hendersonville, Tenn., show the U.S. hotel industry ending 2010 with average daily rate that is essentially flat (-0.6 percent). Still, STR reported that the luxury hotel segment posted a 1.4 percent increase in average daily rate for the week ending June 5, up to $229.52. And luxury hotels also had the largest increase, up 4.4 percent.
“It’s definitely going to be a luxury/upper upscale–led recovery, which is a textbook recovery,” said Mark Lomanno, president of STR, in a press release June 7. “That’s important for the industry to regain pricing power across the board.”
STR projects that supply will grow 2.0 percent during 2010 and demand will grow by 5.7 percent. “Demand is improving; ADR is not,” Lomanno said. “That means there is an extremely fragile recovery. With occupancy being the driver, that’s the most tenuous of recoveries to have.” Lomanno said STR’s forecast takes into consideration that it is time for industry operators to raise rates. “The underlying fundamentals are improving every day,” he said. “We expect fairly rapid ADR movement soon.”
Economy hotels showed the biggest occupancy gains for the week ending June 5, up 5.7 percent to 54.5 percent. The luxury segment had the greatest occupancy overall, just shy of 61 percent. Among the top 25 markets, San Francisco reported the largest increases in all three key metrics. The market’s occupancy rose 12.1 percent to 78.0 percent, ADR increased 14.2 percent to $140.56, and RevPAR jumped 28.1 percent. Also reporting double-digit RevPAR increases were Miami (up 17.6 percent); New York City (up 13.5 percent); and Phoenix (up 11.1 percent).