Sunday, December 04, 2011

Hotels: Occupancy Rate increases 3.4% year-over-year, "full recovery still far away"

by Bill McBride on 12/04/2011 08:15:00 AM

From STR: US results for week ending 26 November

In year-over-year comparisons for the week, occupancy rose 3.4 percent to 45.0 percent, average daily rate increased 3.7 percent to US$90.51 and revenue per available room finished the week with an increase of 7.2 percent to US$40.74.
Note: ADR: Average Daily Rate, RevPAR: Revenue per Available Room.

The following graph shows the seasonal pattern for the hotel occupancy rate using a four week average for the occupancy rate.

Hotel Occupancy Rate Click on graph for larger image.

The fall business travel season is over, and the 4-week average of the occupancy rate will decline into early next year. The occupancy rate is now running pretty close to the median rate for 2000 - 2007. But this is just the occupancy rate, room rates are still lower ...

From Data shows full recovery still far away
Jan Freitag, senior VP of global development for STR (the parent company of, said if the metrics are adjusted for inflation it could be even longer. Specifically, he said the 12-month moving average for U.S. average daily rate was US$107.72 at its peak in September 2008. In October 2011 it was US$101.13.

“You can argue that US$107 versus US$101 is just a US$6 difference,” Freitag said. “But adjusted with inflation you suddenly have to make up US$7 or US$8. It’s at least 24 months away before we do that, and probably longer.”
The other metrics are a bit more complicated to calculate. Occupancy in the U.S., for example, was 63.5% at its peak in 2006 and in October 2011 was at 59.8%. But getting back to 63.5% might not be the right goal to shoot for, Freitag said, because the amount of supply added to the landscape has skewed what would be a common denominator.

Instead, Freitag suggested the industry aim to sell more rooms today than it did in 2008—a goal it has already accomplished. The industry sold 40 million more rooms from January to October 2011 than it did from January to October 2008, although there are 100 million more rooms available today than there were at this time three years ago.

“Going back to pre-recession occupancy levels might not be the right goal,” Freitag said. “The right questions might be: ‘Can we sell more rooms?’ And ‘Can we make more revenue?’”

Measuring revenue, the U.S. hotel industry grossed US$109 billion from January to September 2008 and US$106 billion through the same time frame in 2011. “Even though we’re selling more rooms, we’ve made US$3 billion less,” Freitag said. “That’s purely a function of rate.”
Data Source: Smith Travel Research, Courtesy of

Summary for Week ending Dec 2nd
Schedule for Week of Dec 4th