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Super Stats Predict Future Industry Bounty

For the math minded folks out there, here is a look at where the industry has been and where it’s going with a little help from the numbers.

Thursday, January 24, 2013
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As we learned yesterday the hotel industry is downright giddy with potential and possibility. And from listening and talking to the myriad executives at the event it was great to see such enthusiasm about what lays ahead.

It was definitely more fun than previous year’s events which were decidedly dour. But of course who wasn’t depressed in 2009 and 2010 for example. But this year enthusiasm reigned supreme as hoteliers are focused on the future and who will become the Iron Hotelier. That is who is going to make the best deals possible and get the most industry cred and respect from it.

The one thing we didn’t discuss yesterday was the incredible potential for deals, and by most accounts industry insiders are predicting a massive uptick in transactions. Some say as much as a 50 percent bump each year for the next several years. That will surely goose development side of the business as many hotels tend to switch flags when they are sold.

But as industry experts like to say over and over again it’s all about the fundamentals. They’ve been rock solid for a while now and we can expect them to be even stronger for the next few years at least.

“The end of year was stronger than anyone thought. We have noted each quarter development is on uptick and we are hoping that continues into 2013 and we do not know why it shouldn’t,” said Steve Joyce, President & CEO, Choice Hotels International.

Mit Shah, CEO with Noble Investment Group – a company that owns branded hotels across many companies’ offerings said the fundamentals have been solid because of demand outpacing expectations, a function of the resurgent business transient customer. “In 2013 we are getting real rate premiums, which has been a mixed bag previous. RFPs are up [for future group business] but there is still give and take and it is market by market,” said Shah.

So how exactly is the U.S. doing, especially when compared to the rest of the world?

“The U.S. lodging market is the poster of good news around the world,” said conference organizer Jim Burba.

And it looks as if the numbers reaffirm that statement. Take occupancy. According to STR in 2011 U.S. occupancy rose 4.2 percent and another 2.4 percent in 2012. In Europe it was 3.1 percent and 0.1 percent which Middle East/Africa dropped -6.8 percent (think Libya unrest) before shooting back 6.1 percent in 2012. In Asia Pacific occupancy climbs were anemic coming in at 0.2 percent and 0.5 percent.

ADR has been consistently on the rise in America too jumping 3.8 percent in both 2011 and 2012. In Europe it was 2.6 percent and 4.7 percent while Middle East/Africa saw a 5.3 percent increase followed by a -0.5 percent drop in 2012. In Asia Pacific ADR jumped 9.5 percent and 0.9 percent.

The U.S. has also enjoyed two strong years of RevPAR growth at 8.2 percent and 6.3 percent.

So now that we know the past let’s see how the future is expected to turn out.

According to Mark Woodworth, Executive Vice President, PKF Consulting USA, 2012 was better than they thought. “The industry is becoming more predictable,” he said before explaining how he sees the fundamentals playing out through the next few years.

According to Woodworth – and something we here at Hotel Interactive® completely agree with -- supply growth will be below average through 2016 while demand will above average through 2015. That means occupancy levels will be above average though 2016 which paves the way for an increase of ADR at two times the long term average increase.

But for those of you that like numbers rather than words here they are thanks to STR’s key performance indicator outlook.

In 2013 and 2014 STR says supply will rise just a smidge at 1.0 percent and 1.5 percent respectively while demand jumps 1.8 percent and 2.8 percent. Occupancy is expected to increase 0.8 percent and 1.3 percent helping to boost ADR 4.9 percent and 4.6 percent as RevPAR jumps 5.7 percent and 6.0 percent.

That’s some strong numbers. So the takeaway from this is, if you are not hitting amazing numbers at this point you need to seriously consider why. Is it your sales team? Have you lost heart and need to reenergize yourself? Or is your hotel in just a horrible location, which we hope it’s not.

Oh yeah and don’t set yourself up for regret and miss this rising tide. Go out there and raise those rates already!!

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