13 May 2016
Hotel industry fundamentals are good, and will continue to improve. But the hotel industry is being punished by the disconnect between the investment community of Wall Street and actual performance of the hotels on Main Street. More on the nature of this disconnect shortly, but first, here is the current situation as summarized by Vail Brown of STR last week at the 26th annual Los Angeles hotel investment conference, Meet the Money®.
Total United States Key Performance Indicator Outlook (% Change vs. Prior Year) 2016 – 2017
Note that the actual results for 2015 and the forecast for 2016 and 2017 are pretty good – not as spectacular as they have been in some recent past years, but very sound in terms of long-term trends. Notice also that the average national supply growth is still below the 2% level that raises concerns for oversupply. Demand growth is continuing at a rate greater than supply growth, and that is healthy. While occupancy growth is modest, strong ADR growth is driving RevPAR growth at good levels.
Looking beyond the averages into specific markets
National average statistics are most informative when variations from the median are relatively small. Also, averages can be misleading when there are statistical outliers or even significant variations. That seems to be the case currently, with markets like New York City and Houston struggling, and significant localized damage in oil patch markets.
This problem is illustrated by this slide from Vail Brown’s presentation at Meet the Money®. Note that the declining RevPAR growth in New York City and Houston dragged down the entire industry averages. Many industry leaders believe that New York’s problems have also overly influenced the financial community’s perspective on the hospitality industry, incorrectly assuming that industry performance in New York City is representative of the entire industry. CONTINUE READING →