Hotel Data Conference: Holy Recovery, Batman
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The hotel industry faces headwinds like the European debt crisis and high unemployment, but demand is strong. Transient and group demand are higher than the prior peak in 2007. Occupancy rates are increasing as new hotel supply growth remains below historical averages. However, average daily rates have not fully recovered to pre-recession levels, restraining industry profits. Many hotels are charging rates well below their peaks. Competitive pressures may be slowing the rate recovery as fewer than half of named competitors actually name each other back. Overall, the outlook is positive if rates can continue increasing.
Hotel Data Conference: Holy Recovery, Batman
- 1. Holy Recovery, Batman! - The State of The U.S. Hotel Industry - Jan D. Freitag SVP
- 2. The hotel industry and the larger economy face plenty of headwinds: The European Debt Crisis. High unemployment. An uncertain election.
- 4. So, what should we do? Well, in Gotham the answer is easy .....
- 6. Soon enough the familiar search light brings calm to the people who need assistance.
- 8. And truly, some assistance is needed, because even though we are not technically in a recession any more, it sure feels like it to some ....
- 10. ...and we all have to act smarter and maybe even downsize ...
- 12. The number that drives a lot of the uncertainty is the stubbornly high unemployment rate ....
- 13. 8.3% * bls.gov, 7/12
- 14. ...which forces people to take second jobs or jobs that they are over-qualified for ....
- 16. Luckily for the hotel industry, the unemployment rate for people with high paying jobs is low....
- 17. 14.9 9.3 8.2 4.3 ess Than High School School Some College High College and Highe * bls.gov, 7/12
- 18. Of course, there are always people who hate their jobs .....
- 20. ...but the majority of business people who have jobs are pretty happy and they are traveling ....
- 22. ...and airline load factors are pretty high....
- 24. ... and on the leisure side, after years of stay-cations, families are back on the road.....
- 28. And at STR we see that in the occupancy rates of the urban, airport and resort hotels.
- 29. 74.9% 74.4% 73.4% Airport Urban Resort *Total US, OCC%, 7/12
- 30. In the first seven months of this year the industry reported record breaking performance. We sold more rooms than in any other January / July period - EVER.
- 31. 638 Million Rooms Sold!!! * Total US, YTD 7/12
- 32. ... And in July we sold more rooms than in any other single month - EVER.
- 33. 106 Million Rooms Sold!!! *Total US, July 12
- 34. That is just awesome!
- 36. At the same time, supply additions are well below the 25 year, long term average of 2%
- 37. 3.0 2.5 2.0 LTA: 2% 1.5 1.0 0.5 0.4% 0.0 2009 2010 2011 2012 *Total US, Supply % Change, 12 MMA 1/2009 7/2012
- 38. ... which obviously leads to increasing US hotel occupancies.
- 39. % 61 60 59 58 57 Jan 11 Jul 11 Jan 12 Jul 1 *Total US, 12 MMA Occupancy%, 1/11 - 7/12
- 40. Looking at this from a slightly different perspective: Transient versus Group room demand....
- 42. Transient room demand is higher now than it was in the prior peak year....
- 43. 20 2007 2012 17.5 Millions 15 12.5 10 Jan Jul *Transient Room Demand; 2007 & 2012
- 44. And when examining group room demand ...
- 46. ...we see the same pattern: almost record group demand.
- 47. 12 2007 2012 10 Millions 8 6 4 Jan Jul *Group Room Demand; 2007 & 2012
- 48. So... We should all be fat and happy, right?
- 50. Well, we are not. And that is because room rates have still not recovered to inflation adjusted levels of 2008.
- 51. Nominal ADR $117 2007 ADR Grown By Inflation $109 $107 2008 2010 2012F 2013F * Total U.S., ADR $, 2008 2013F
- 52. Why not? Well, that is the riddle.
- 54. ADR growth has been erratic before....
- 55. ADR Fluctuations Get More Extreme, But.... 5 0% 0 -5 -4.5% -8.9% -10 1990 2000 2010 *Total US, ADR % Change, 12 MMA 1/1990 7/2012
- 56. ....but more importantly in this recovery the ADR rebound was stymied too early.
- 57. 2012 ADR Recovery: Over Too Soon 7.5% 6.9% 5 4.1% 0% 0 -5 -4.5% -8.9% -10 1990 2000 2010 *Total US, ADR % Change, Trough to Peak, 12 MMA 1/1990 7/2012
- 58. And in absolute Dollar terms, hoteliers in many markets charge an ADR well below the prior peak...
- 59. How Much Are Markets Still Off Peak ($)? -$6 -$6 -$7 -$8 -$8 -$9 -$9 -$10 -$11 -$11 -$12 -$12 -$13 -$20 -$34 * Select 15 Markets, ADR $ Change From Prior Peak, as of 6/12
- 60. That is just scary!
- 62. Looking at this another way: Back then we were discounting more quickly than we are now increasing ADRs
- 63. ADR Discounting at Twice The Speed of ADR Increases 110 Sept 08 $108 7/12 105 $104 Dec 11 -10% $102 100 +4.9% 19 Months 19 Months Apr 10 95 $97 2008 2009 2010 2011 2012 *Total US, ADR $, 12 MMA 1/08 7/12
- 64. Hoteliers tell us that they want to increase their rates, but that their comp sets are not following suit. They tell us: Those competitors are just a bunch of villains...
- 66. We wondered: If comp sets have such a big impact on the industry, how good are those comp sets really? So we examined if the hotels that you name in your comp set are naming you back in their own comp sets. What is that nameback percentage for all 39,000 comp sets we house?
- 67. Do You Really Know Your Competitors? National Nameback %: ??% * % of hotels in a compset which have named the subject back Source: STR Analytics
- 68. Do You Really Know Your Competitors? Comp Set Competitor Competitor Competitor Subject ? Competitor Competitor Competitor Source: STR Analytics
- 69. So, what is that number? That is the question!
- 71. Turns out: Less than 1 in 2 hotels that you name as a competitor actually names you back. Interesting....
- 72. Do You Really Know Your Competitors? National Nameback %: 45% * % of hotels in a compset which have named the subject back Source: STR Analytics
- 73. And we actually tell you which hotels name you in their comp set for free. Its called a reverse comp set. E-mail us for your reverse comp set.
- 74. For your Reverse Comp Set please e-mail info@str.com
- 75. So, this has been your 3rd PowerPoint this morning and most of you look like you are ready for some caffeine. To summarize: -Record demand -Supply growth not an issue -Room rate growth still a bit of a wild card.
- 77. Just remember, when you need assistance with crime fighting you call Batman.
- 79. And for your data needs you call STR. We are here to help. Thank you very much.