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Sunday, March 27, 2016

Hotels: Supply increased faster than Demand in January and February

by Calculated Risk on 3/27/2016 10:22:00 AM

From Freitag’s 5: US RevPAR growth underwhelms in February

1. RevPAR has now grown for 72 months

Even though the numbers are small, they are positive. We expect them to be so for the next 18 months. Just like last month, RevPAR growth was driven by average daily rate, as occupancies are on a declining trajectory:

This should not come as a surprise because we have been warning about pipeline growth for a while. But it shows that when the weather does not cooperate and the U.S. economy catches a mild cold, there is an immediate impact on occupancies. However, the 61.7% occupancy for February is still the second-highest occupancy ever recorded.

2. Supply growth has outpaced demand growth for two consecutive months

Demand increased only 0.6%. It is worth pointing out that demand is still growing, so while that continues to be true we are breaking demand records every month.

But 0.6% growth sounds pretty flat, and with the increase in supply of 1.6% you get the occupancy decline as described above. As I suggested last month, the supply uptick is a sequential 0.1% (from +1.5% in January), but it is also worth emphasizing that it represents a doubling of the supply percent change from February 2015, which at the time was 0.8% growth.
And weekly data from STR: US hotel results for week ending 19 March
The U.S. hotel industry reported positive results in the three key performance metrics during the week of 13-19 March 2016, according to data from STR.

In year-over-year comparisons, the industry’s occupancy increased 1.9% to 70.5%. Average daily rate for the week was up 4.2% to US$127.72. Revenue per available room increased 6.2% to US$90.04.
emphasis added
The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.  The occupancy rate should continue to increase into the Spring, and then increase further during the Summer travel period.

Hotel Occupancy RateThe red line is for 2016, dashed orange is 2015, blue is the median, and black is for 2009 - the worst year since the Great Depression for hotels.

2015 was the best year on record for hotels.

So far 2016 is just behind 2015.

Data Source: Smith Travel Research, Courtesy of