An analysis of how Hurricane Katrina affected the extended-stay hotel segment in 2005 and 2006 provides a benchmark for what lingering effects markets hit by 2017’s hurricanes can expect.
ATLANTA—Empirical evidence from the post Hurricane Katrina period strongly indicates the recent severe weather will significantly increase extended-stay hotel revenue per available room in markets closest to where Hurricanes Harvey and Irma landed.
Furthermore, the boost to the extended-stay segment’s current strong performance will extend regionally during the near term, and the benefit to economy extended-stay hotels could measurably lift the segment’s national average performance well into 2018.
In late August 2005, Hurricane Katrina caused mass evacuations and a surge in demand for lodging. The geographic impact on hotels was widespread but heaviest in markets closest to New Orleans. Extended-stay hotels are particularly well-suited to displaced persons, relief agencies, insurance adjusters and those involved in rebuilding impacted areas.
Out of the 100 largest U.S. metropolitan statistical areas (MSAs), Katrina had the greatest effect on Austin, Texas; Baton Rouge, Louisiana; Birmingham, Alabama; Dallas-Fort Worth, Texas; Houston; New Orleans and San Antonio. Hurricane Katrina essentially filled extended-stay hotels in these markets (Katrina Markets) for the last four months of 2005 and kept occupancy above the other market (100 largest MSAs excluding Katrina Markets) average during 2006.
The impact on average daily rate was greatest in the year following the storm with Katrina Markets gaining 14.5% compared to 9.2% in other markets.
RevPAR growth in Katrina Markets was significantly higher than other markets in both 2005 and 2006.
Hurricane Katrina also boosted many other markets in the South Atlantic and West South-Central regions. These regions account for more than 30% of U.S. extended-stay hotel rooms and more than 40% of economy extended-stay supply. The impact on the economy segment was the greatest and it was long enough to boost the segment’s national average occupancy through mid-2006.
Katrina’s impact on economy extended-stay ADR was immediate and sustained well into 2006.
Following Hurricane Katrina, economy extended-stay hotel national average RevPAR reported double-digit growth for four consecutive quarters, and the 15.4% gain in Q4 2005 is the segment’s largest quarterly increase ever reported.
Meteorologically, Hurricanes Harvey and Irma affected more markets than Katrina. By the end of 2017, we should know if the impact on extended-stay hotels is equally widespread.
Mark Skinner, ISHC is a partner with The Highland Group. Tel (404) 872 4631 www.highland-group.net
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