Hotel ramp-up times vary by class, other factors
 
Hotel ramp-up times vary by class, other factors
12 SEPTEMBER 2019 7:34 AM

New-build hotels, hotels opening after major renovations and hotels shifting classes all behave differently when it comes to ramp-up times and factors, according to STR data.

NASHVILLE, Tennessee—Ramp-up, the point at which a hotel reaches 100% or greater revenue per available room index, is not one-size-fits-all.

Data shows differences in occupancy and average daily rate ramp-up times for hotels that are new-construction, going through a brand or class change, and under major renovation.

STR Senior Consultant Emmy Hise presented data covering these scenarios at the 2019 Hotel Data Conference. Her presentation was based on STR research that analyzed a sample of U.S. hotels, aggregated hotel raw data to determine ramp-up time compared to primary comp sets, and measured the percentage of properties in each group achieving ramp up. (STR is the parent company of Hotel News Now.)

New construction
New-construction hotels in the set achieved 100% RevPAR index at month 17, according to the data.

“Occupancy for new-construction properties starts out slow, hitting 58% occupancy in month one, but in less than two years, they achieve 100% occupancy index,” Hise said. “Average daily rate ramp-up starts out hot … and RevPAR index mirrors occupancy at the beginning, but in less than two years, you achieve your RevPAR index for new-builds.”

Hise broke down the numbers for two key hotel markets, New York City and Miami, finding that most new-construction hotels in New York City don’t achieve RevPAR index until month 35.

Miami, however, “tells a totally different story,” she said.

“RevPAR index achieves 100% by month seven, so less than a year,” Hise said. “It’s the ADR that continues to shoot up, and there’s less supply in this market over the long term as well.”

Brand changes
STR analyzed hotels that changed from branded to independent or vice versa, excluding soft brands.

There’s not much of a ramp-up story for brands converting to independent, Hise said, though “there’s a little bit when it comes to occupancy, where hotels start at 79% and move up to 92% index (by month 35).”

Independent hotels converting to brands also see the most changes in occupancy, Hise said. Hotels in the set started at 68% index and moved up to 99% index by month 33.

Class changes
Analysis of hotels that shifted from upper-tier (luxury, upper upscale and upscale) to lower-tier (upper midscale, midscale and economy), and vice versa, revealed a few surprises.

“Upper-tier to lower-tier is one of the few scenarios where ADR index starts out higher—at 92% index—and drops to about 88% by month 35,” Hise said.

RevPAR hits its peak around month 30, but she said “very few of these properties ever achieve RevPAR index.”

Hotels converting from lower tiers to upper tiers fare better when it comes to achieving RevPAR index.

“By year two, nearly half the properties achieve RevPAR index, but more achieve occupancy index earlier,” she said. “Into year three, it’s at more than 50% of the properties achieving 100% index or higher.”

Renovation ramp-up
For hotels undergoing major renovations, ramp-up is driven primarily by occupancy.

“There were minimal ADR index shifts post-renovation,” Hise said. “ADR index comes out above 100% index at month one and continues to grow, so the ramp is in occupancy and therefore RevPAR.”

Compared to new-build hotels, hotels coming out of major renovations take longer to ramp up, achieving 100% index in a little over two years.

No Comments

Comments that include blatant advertisements or links to products or company websites will be removed to avoid instances of spam. Also, comments that include profanity, lewdness, personal attacks, solicitations or advertising, or other similarly inappropriate or offensive comments or material will be removed from the site. You are fully responsible for the content you post. The opinions expressed in comments do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Please report any violations to our editorial staff.