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US primary election impact on hotel demand
January 3 2012

The Republican presidential nomination contest is heating up. But is it having a correlating impact on the hotel industries in states that host primary elections?

Highlights
  • An increase of roughly between 1,000 and 2,000 roomnights per night for the campaign month seems possible.
  • The room revenue impact seems to be upward of US$3 million.
  • During 2004 in Iowa (the last time only one party held a primary in the state) Iowa saw demand hit 541,000 rooms, an increase over the prior three-year average of 508,000 rooms.
By Jan Freitag
Senior VP, Strategic Development, STR
jan@str.com

HENDERSONVILLE, Tennessee—With the Republican presidential nomination contest in full swing, voters in the first three primary states—Iowa, New Hampshire and South Carolina—are seeing candidates and campaign staffers, press and pundits flocking across their borders. All those out-of-towners attending the various pancake breakfasts and sandwich-shop stops give a sizeable boost to the local economy and hotel demand.

 

Jan Freitag

Here are some observations about the impact on the local hotel industries.

 

When examining a potential demand lift, it is probably fair to assume the 2000 and 2008 elections had far greater impacts because no incumbent was running and both parties had to campaign in all states. In contrast, during 2004 the sitting President Bush was the only party candidate on the Republican primary ballot and therefore won all states easily without campaigning. The same pattern is expected to hold for President Obama in 2012. 

The primary election calendar for this and the last three campaigns was/is as follows:

 

State 2000 2004 2008 2012
Iowa 24 January 10 January 3 January 3 January
New Hampshire 1 February 27 January 8 January 10 January
South Carolina 19 February* 3 February (Mini Tuesday) 19 January** 21 January

 *Democratic Primary took Place 9 March 2000
**Democratic Primary took place 26 January 2008

 

For this article, we are only examining the demand and revenue for one month (the “campaign month”). The campaign month is either the preceding month or the month of the primary, depending on the election’s exact date. So, because Iowa’s election was so early in January 2008, we are examining December 2007’s performance. We are omitting any potential impact in the prior months, but certainly some room revenues are generated well before the campaign months.

To estimate the potential lift in revenue and rooms sold, we assumed the same month three years prior to the year of the campaign month had average performance. We therefore looked at the difference between the campaign month and the monthly three-year average to find any potential primary impact.

Iowa demand and revenue impact

Demand ('000s of rooms)

Year Campaign Month Prior 3-year Average Campaign Month Result Primary Campaign "Lift"

2000

January

490

531

+ 41

2004

January

508

541

+ 33

2008

December '07

557

618

+ 61

 

 

 

Revenue (US$ Millions):

 

Year Campaign Month Prior 3-year Average Campaign Month Result Primary Campaign "Lift"

2000

January

24.7

29.8

+ 5.1

2004

January

28

31.8

+ 3.8

2008

December '07

34.1

43.6

+ 9.5

 

As expected, the additional room demand generated in 2004, when only the Democratic Party held the primary, was lower than the other two years when there was no incumbent. Traditionally, the 25-year average January occupancy in Iowa is only 42.8%, so any demand increase was certainly welcome news.

New Hampshire demand and revenue impact

Demand ('000s of rooms)

 

Year Campaign Month Prior 3-year Average Campaign Month Result Primary Campaign "Lift"

2000

January

225

267

+ 42

2004

January

246

274

+ 28

2008

December '07

242

262

+ 20

 

Revenue (US$ Millions):

 

Year Campaign Month Prior 3-year Average Campaign Month Result Primary Campaign "Lift"

2000

January

14.4

21.5

+ 7.1

2004

January

18.7

25.0

+ 6.3

2008

December '07

21.1

24.3

+ 3.2

 

The 2008 New Hampshire campaign was not as beneficial to the hotel industry as the prior two campaigns. It could be argued, though, the additional five days available in January after the Iowa campaign (between 3 January and 8 January) probably increased spending on the New Hampshire campaign trail. Because these days are not reflected in our December numbers, the absolute impact might well be stronger. The 25-year average January occupancy in New Hampshire is only 43.4%, so hoteliers certainly had spare capacity to accommodate the increase in demand.

South Carolina demand and revenue impact

Demand ('000s of rooms)

 

Year Campaign Month Prior 3-year Average Campaign Month Result Primary Campaign "Lift"

2000

February

1,326

1,387

+ 61

2004

January

1,161

1,256

+ 95

2008

January

1,299

1,278

- 21

 

Revenue (US$ Millions):

Year Campaign Month Prior 3-year Average Campaign Month Result Primary Campaign "Lift"

2000

February

69.5

77.3

+ 7.8

2004

January

62.7

70.1

+ 7.4

2008

January

82

93.6

+ 11.6

 

Despite the flurry of seven Democratic primaries on 3 February 2004 (“Mini Tuesday”) it seems some additional room demand and revenue can be attributed to the Democratic campaign. But as in New Hampshire, the impact of the 2008 primary campaigns did not meaningfully contribute to the hotel demand in South Carolina. Despite the lack of uptick in demand, there was a significant change in room revenue for the month of January 2008 when compared to the January results of the prior three years. And an additional cursory look at the December 2007 results revealed the same patterns with lower demand and higher revenues than during an average December month. The demand increase certainly helped occupancies, especially because the 25-year average January occupancy in South Carolina is only 43%.

Nevada also held primary elections for both parties on 19 January 2008, so it is probably fair to assume some demand (and revenue) was diverted there. But because of the sheer size of Nevada’s hotel industry, it is hard to discern any noticeable impact.

Overall, there seems to be a visible influence on room demand and revenue in the early primary states Iowa, New Hampshire and South Carolina. Given the data shown above, an increase of roughly between 1,000 and 2,000 roomnights per night for the campaign month seems possible. The room revenue impact seems to be upward of US$3 million. The caveat to the analysis here is obviously that we did not control for general macro economic trends and a general up or downswing of the hotel industry that might have swayed the results. But intuitively it makes sense that a unique event such as the primaries impacts the local hotel industry and provides much needed influx of guests and revenues in an otherwise slow demand month.

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