The bright spots in DC’s hotel data despite tough comps
The bright spots in DC’s hotel data despite tough comps
20 SEPTEMBER 2018 7:30 AM

Every four years, events related to the U.S. presidential election and inauguration create tough comps for hotels in Washington, D.C. How are hotels in the market faring this time around?

WASHINGTON—Observers of hotel data for properties in Washington, D.C.’s central business district could be excused for suffering from whiplash.

Every four years, a steep influx of visitors for the U.S. presidential inauguration creates a groundswell of demand, which in the following year leads to sharp revenue-per-available-room declines for D.C. hotels—what we in the data business call a “tough comp.”

This article examines the most recent inauguration’s impact in 2017 and the 2018 performance in the market so far.

CBD snapshot

Through July, RevPAR in the market declined 6.7%, which so far is unsurprising. But a few facts stand out and are worth examining.

Despite the fact the data through July 2017 included the impact from crowds for the inauguration and the Million Women’s March, hoteliers in the CBD of the nation’s capital have been able to increase the number of rooms sold this year. This is a remarkable achievement and speaks well for the underlying strength of the market as a group, leisure and corporate destination.

Occupancy declined, but solely because the influx of new rooms eclipsed the demand growth. That said, occupancy through July shows that still eight of 10 rooms were sold every night. Last year, ADR was of course boosted by the influx of foreign dignitaries and the large crowd of marchers, which was not expected to be sustainable. Still, an ADR in excess of $230 is certainly impressive.

Inauguration comp year-over-year

To gain a better understanding of the full impact of the inauguration, STR isolated the January RevPAR percent change of the inauguration year and the following year. (STR is the parent company of Hotel News Now.)

Clearly, when the U.S. administration changes, the inauguration is a boon for the local hotel industry. The RevPAR increases for the first inaugurations of George W. Bush and Barack Obama seem to point at that pattern. The inauguration of Donald Trump also seems to follow that pattern. But it is worth noting that 2017 was different from prior years because the Women’s March demand buoyed January performance to unprecedented levels.

The percent changes in the prior years are not unexpected and simply show a “return to normal.” But despite a 41.5% drop in RevPAR in January 2018, one could argue the decline was not as steep as it could have been given the 81.9% RevPAR increase in the prior year.

Excluding January from YTD numbers

A different way to analyze the underlying strength of the Washington’s CBD hotels is to exclude the January performance and create a year-to-date demand number for the year after the inauguration that is not skewed by the wild swings of January data.

Examining room demand for the six months ending July in the year after presidential inaugurations again seems to suggest that the switch to President Obama and to President Trump had a profound impact. That is not to say that the CBD hotels live off of changes in administration alone, but the 2014 data seems noticeably weaker when no change took place.

Demand data for 2002 seems to be an outlier, but it easily can be explained by the recession that hit the U.S. after the terrorist attacks of 11 September 2001. Even a strong market like D.C. wasn’t immune to the impact.

In summary, the performance of hotels in the Washington, D.C., CBD was, is and will be strong. The submarket performance data is prone to wild swings as inauguration guests and counter-demonstrators fill hotel rooms, and the swings seem especially pronounced during administration changes. Given that this demand pattern is easily recognizable, hotels can prepare for the next inauguration ceremony on 20 January 2021.

Jan Freitag is the SVP of lodging insights at STR.

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.

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