2012 Trends in the U.S. Hospitality Industry
What are the 2012 trends in the U.S. Hospitality industry? What is happening now can be very helpful in predicting what will happen in the future. Any attempt to determine the strength of the hospitality industry must include the gathering, recording and presentation of relevant data. By analyzing this data, anyone interested in understanding the health of the industry will be much better informed than if they just looked at broader measures of the economy as a whole.
It is important to understand that a hotel’s performance often depends in large part on the macroeconomic environment. That is, there are many outside factors of the overall economy that can influence occupancy rates and the amount of money being generated in the hospitality industry.
No Business Operates in a Vacuum.
The U.S. Hospitality industry depends in large part on the number of people traveling for business or pleasure. The number of people who travel for business or pleasure is affected by the economy. The policies of the government can affect the performance of the economy. When it comes right down to it, if individuals and corporations are doing well financially, they are more apt to take vacations and spend money on business travel. People need to have confidence that the future is looking better and that they will have a safe and enjoyable experience when they travel. All of the factors listed below can have an influence on how well the hotel and hospitality industry will perform.
• Consumer confidence and Consumer spending
• Jobs and the unemployment rate
• Oil prices and the price of filling up your car’s gas tank
• The US Dollar’s strength in relation to foreign currencies
• The Strength of the Housing market
• Fiscal policy – Will the President make the Bush Tax Cuts permanent?
• Monetary policy – Will the Federal Reserve keep interest rates low?
• Terrorist threats and natural disasters
Statistics that Matter Most
It is pretty hard to make an accurate forecast of the revenues a hotel will generate just by looking at broad factors like those mentioned above. The hotel and hospitality industry relies on some very specific figures to identify trends and predict the future progress and performance in their industry. Most helpful are statistics that show the occupancy rates and the revenue generated by guests paying for accommodations. The most important metric is the RevPAR or revenue per available room.
RevPAR is a very powerful statistic that tells a hotel manager or owner how much money they are bringing in and also how well their property is being utilized. It is calculated by dividing the total guest revenue by the total number of rooms available.
Looking over the nominal figures from 2009-2012, as provided by Smith Travel Research, is revealing. In 2009, when the U.S. economy was suffering the most from recession, the rate was $53.50. It climbed to $56.41 in 2010 and then jumped to $61.05 in 2011 as the economy was showing good signs of recovery. For 2012, the Nominal RevPAR is expected to reach $65.01. The trend should continue in 2013 as estimates are for a further increase to $68.63.
Other Important Figures that Show a Trend
Occupancy rates are derived by taking the total number of guest rooms and dividing it by the total number of rooms occupied. This addresses how well the capacity is being utilized, but does not take into account how much money is being generated. Obviously, if you “give away” rooms at below your break-even point, you will increase your occupancy rate, but do nothing for your bottom line.
The occupancy rates from 2009-2012 are as follows:
2009 – 54.6%
2010 – 57.5%
2011 – 60.0%
2012 – 61.3%
2013 – 61.7% (projected).
The ADR or Average Daily Rate is determined by dividing Room Revenue by the number of Rooms Sold. This will show you the price that you are getting for a guest room in absolute dollar terms, but does not tell you anything about the occupancy rate or if you are maximizing revenues for the property as a whole. Multiplying the occupancy percentage by the ADR will give you the RevPAR.
ADR for the 2009-2012 period is as follows:
2010 – $98.06
2011 – $101.70
2012 – $106.08
2013 – $111.18 (projected).
The numbers all point to a slow but steadily improving hotel industry. RevPAR, the most important indicator of a hotel’s financial health has moved up nicely in recent years. There are any number of world events or domestic issues that could make these 2012 trends slow down or even reverse and head in a negative direction. Property owners and hotel management groups should pay attention to providing the best possible service and guest experience at the properties they own or manage. Once you do all you can to improve your operation, there is nothing more to do than wait for your guests to arrive.
Related topic: Emerging Markets Hotel Industry
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