In Depth Analysis: CalculatedRisk Newsletter on Real Estate (Ad Free) Read it here.

Tuesday, September 01, 2009

Hotels: "A False Bottom in RevPAR?"

by Calculated Risk on 9/01/2009 08:50:00 AM

In my weekly posts on hotel occupancy and RevPAR (Revenue per available room), I've been noting:

Earlier this year business travel was off much more than leisure travel. So it was expected that the summer months would not be as weak as earlier in the year. September - after Labor Day (Sept 7th) - will be the real test for business travel, and for the hotel industry.
Here is an excerpt from some Morgan Stanley research released last week on hotels making the same point: A False Bottom in RevPAR? (no link).
"[W]e are in an operating environment in which a) group demand is significantly worse than transient demand, and b) leisure demand is holding up better than the other segments. Due to the seasonality of the lodging demand mix, we believe that July and August RevPAR improvement is partially a mirage created by a shift in the demand mix away from groups and toward leisure. As the demand mix shifts back away from leisure and toward group in September and October, we expect RevPAR trends to deteriorate from this false bottom. ... we expect ... RevPAR declines to be close to 20% for [September and October].
emphasis added
Last week, from STR reports US performance for week ending 22 August 2009
Revenue per available room for the week decreased 16.7 percent to finish at US$57.84.
With the expected seasonal decline in leisure travel, I wouldn't be surprised to see RevPAR off 20% in September and October - and that will put additional pressure on hotels.