2015: Smooth Sailing Ahead for the U.S. Hotel Industry
Reports from a number of well-respected companies that gather and analyze data for the hotel industry all seem to have come to the same conclusion: hotels all across the United States have been doing well in 2014 and they will do even better in 2015. There is unanimous consent in the most recent reports issued by Smith Travel Reports (STR), PricewaterhouseCoopers (PWC) and TravelClick’s North American Hospitality Review (NAHR) that RevPAR, Average Daily Rates and Occupancy, will all show improvement in 2015.
According to the latest statistics reported by STR and STR Global, all three of the key data-points that are used to assess hotel performance were up in year-over-year comparisons. The July of 2014 occupancy rate was 73.6%, an increase of 3.9% over the July of 2013 occupancy rate. The ADR in July of 2014 was $117.81, bettering the prior year’s ADR by 4.8%. RevPAR showed the biggest year-over-year gains, surging by 8.8% in July of 2014.
PricewaterhouseCoopers concluded in an August 2014 report that U.S. hotel occupancy rates will reach their highest levels in 20 years, during calendar year 2015.They noted that companies are increasing their travel spending budgets which leads to more group reservations. With the supply of hotel rooms remaining almost unchanged, added demand allows hotel managers the flexibility to raise rates without hurting occupancy rates. The PwC report predicts that continued strong group travel, as well as a strong summer travel season, will push hotel occupancy rates up about 2 percentage points, to 64.1% for the year ending December 31, 2014. For 2015, the momentum is expected to continue with occupancy rates rising to a 20-year high of 64.8%. PwC also predicts that RevPAR for 2014 will increase by 7.6% over 2013 RevPAR, and in 2015, RevPAR will be up 6.9% over the 2014 figure.
The August 2014 TravelClick North American Hospitality Review was quite optimistic about the immediate future prospects for the hotel industry. John Hach, Senior Vice President for Global Product Management at TravelClick said “While summer may be coming to an end, the hotel market has a hot outlook for the winter months.” Traditionally, summer is always a good time to be in the hotel business as the kids are home from school and families use the time to take vacations. In 2014, business travel has done surprisingly well and is expected to stay strong through 2015. Over the next 12 months (August 2014 through July 2015), committed occupancy is up 3.7% over the same 12-month period a year ago. Committed occupancy includes both group commitments and individual room reservations. The NAHP data also showed that in year-over-year comparisons, bookings for the transient leisure segment are up 4% and bookings for the transient business segment are up is up 5%.
The hotel industry is one of the most economically sensitive sectors of our economy. A strong hotel market is a solid indicator of the strength of the overall economy. When times are good, there is more economic activity and business executives travel for meetings, conferences and trade shows. When people have more money in their pockets, they go on vacations, book more hotel rooms, and inject money into the economy.
There are few industries that rely more on compiling and analyzing data than the hotel industry. RevPAR, occupancy, ADR and other metrics are used to measure a hotel’s performance. Once numbers and the latest economic data (GDP, unemployment rates, disposable income etc.) are analyzed, they can be used to guide managers to deploy the best pricing, marketing, and other strategies to maximize a hotel’s future revenues.