Events surrounding the inauguration of President Donald Trump, which drew a crowd of more than 1 million to Washington, D.C., significantly skewed overall U.S. hotel performance for January.
HENDERSONVILLE, Tennessee—It seemed to me that attendees at the annual Americas Lodging Investment Summit in late January substituted their fear of the unknown when Hillary Clinton was expected to the be the next president with the eager anticipation of the unknown after Donald Trump won the election. Interesting how group psychology works.
Here are five other factors—about U.S. hotel industry performance in January, courtesy of STR, HNN’s parent company— that may have played a part in the group optimism at the conference.
1. Presidential effect on performance
January results were actually a little bit stronger than anticipated. Revenue per available room grew 3.8%, driven up by average daily rate growth of 3.2% (a lot stronger than expected) and occupancy growth of 0.5% (a little bit stronger than expected). This marks the 83rd month of consecutive RevPAR growth.
The slightly stronger results were partially due to very strong results in Washington, D.C., which hosted the presidential inauguration and the Women’s March (more than 1 million combined attendees, but I am not getting into how many were at each event). D.C. results added a full 110 basis points to the U.S. results. Excluding D.C., U.S. RevPAR growth was +2.7%, which is basically in line with what was expected. Supply increased 1.9%, stronger growth than in any month in 2016 that we have seen. Demand increased 2.4%, stronger than in nine of 12 months in 2016. Demand results only saw a very slight lift from the demand in D.C. (+20 basis points). The true impact of D.C. can be seen in the room revenue growth results (+5.7% when including D.C. and +4.6% without).
2. Segmentation data strong
Transient RevPAR increased 4.2%, and group RevPAR increased 5.9%. In both cases, ADR was the driver (+3.3% for transient and +5.2% for group). Just for reference, group ADR growth on that level had only been recorded once in 2016 (in July) and never in 2015 or 2014. But yes, D.C results mattered here as well, since D.C. group ADR growth clocked in 48.7%. D.C performance meandered also through some of the other group RevPAR results: Hotels with between 751 and 1,000 rooms reported RevPAR growth of 13.9%, urban hotels saw 9.4% growth, and South Atlantic hotels 6.3% growth.
3. Upper versus lower chain scales
Chain scale results for the month were strong on the high end and more muted on the lower end.
So, in other words, the performance of high-end, full-service hotels really overshadowed the “more normal” results of the rest of the scales. RevPAR growth of 1%-plus was more in line with expectations. It will be very interesting to note what the chain scale results are in February without a one-time event skewing the data.
4. Overall occupancy slumps
Spoiler Alert: Washington, D.C., RevPAR was up 51.3%. There you go. Now on to the other results:
January is just a sad month. In the Top 25 markets, occupancy was 63.6%; for all other markets, it was ... wait for it … 49.6%. Yep, in the combined 139 of 164 markets, the average occupancy was less than 50%. Nobody wants to travel in January.
Even in D.C., the occupancy for the month was only 56.4%—true, that’s 9.4% higher than last year, but still accounts for a lot of empty rooms. The D.C. push came from ADR, which increased 38.3%. This in turn probably was the main contributing factor to the 4.1% ADR growth for the Top 25 markets, compared to the 2.5% growth for all other markets.
New York City had a third positive RevPAR growth month in a row (+3%), driven up by very positive 8.2% demand growth and hence 2.9% occupancy growth. The fact that 1 January fell on a Sunday may have partially helped. But it’s the third month in a row. Are we witnessing the great return of Gotham? Ask me in three months, I guess.
5. ADR boosts RevPAR by double-digits
Spoiler alert: RevPAR Segmentation growth in D.C. was 62.8% for transient and 77.1% for group. There you go. Now on to the other results:
ADR growth is where the story was, with transient rate growth of 3.5% and group rate growth of 6.5%. Was that just D.C., you ask? No. Interestingly 10 other markets reported healthy ADR and hence double-digit group RevPAR growth rates:
And yes, for some of these markets the absolute values were pretty tiny so the percent changes are outsized, if you must know. Can’t you guys ever just be happy with double digit results? Right, me neither.
This article represents an interpretation of data collected by STR, parent company of HNN. Please feel free to comment or contact an editor with any questions or concerns.