An analysis of STR data and hotel chain scales shows Marriott International has the majority of rooms in the three highest segments but midlevel chain scales dominate new supply.
NASHVILLE, Tennessee—Demand is outpacing supply growth for the overall hotel industry, which is most noticeable in the upscale and upper-upscale segments, according to data from STR, parent company of Hotel News Now.
During the “Weighing in on chain scales” session at Hotel Data Conference in August, Elyse Carfrey, business development executive—industry partners, at STR, dove deeper into the revised forecast released at the conference by breaking down performance by chain scale.
1. Marriott dominates room supply
After acquiring Starwood Hotels & Resorts Worldwide in 2016, it is no surprise that Marriott International dominates the top three chain scales as of June 2018, Carfrey said.
“Thirty-three percent of luxury rooms belong to Marriott,” She said. “Fifty-one percent—over half the market—in upper upscale belong to Marriott.”
She added that Marriott has 41% of upscale rooms.
“And then we have (InterContinental Hotels Group) coming in at 29% with upper midscale, (Choice Hotels International) 32% midscale, and then (Wyndham Worldwide) 34% (economy),” she said.
2. Demand is outpacing supply
As discussed during earlier sessions at the conference, demand is outpacing supply when looking at the 12-month moving average for May 2017 through June 2018.
Demand growth is most significantly outpacing supply growth in the upscale and upper-midscale segments, Carfrey said. The data shows that demand growth is at 6.4% for upscale and 5% for upper midscale.
“Upper upscale has more of a relative correlation there with supply and demand growth,” she added, with upper-upscale supply growth at 2.4% and demand growth at 2.6%.
3. Luxury maintaining high ADR
Average daily rate actuals show that luxury ADR is way up at $330, and that segment is maintaining 75% occupancy rate.
“So luxury hotels are certainly taking advantage of their guests right now and using that ADR rate,” Carfrey said.
She added that there is an interesting drop-off rate in ADR for upper-upscale hotels.
“Upper upscale (is) still up there with a high 74% occupancy rate, but we see that ADR drop down a tad,” Carfrey said. “And then through the rest of the scales, that ADR does tend to drop off there.”
The presentation also included a look at the highest ADR markets by scale:
- Luxury: Utah, $681
- Upper upscale: Maui, $333
- Upscale: Maui, $243
- Upper midscale: Florida Keys, $199
- Midscale: New York City, $156
- Economy: New York City, $142
4. Luxury leads F&B revenue distribution
According to STR’s HOST data, luxury hotels lead the way for food-and-beverage revenue distribution.
The data shows that the luxury segment has 19% food revenue distribution and 7% of beverage revenue. Upper-upscale hotels are a close second to the luxury segment with 18% food revenue and 5% beverage revenue.
The luxury segment also comes in first for revenue distribution for other revenue (10%), with 6% revenue distribution for other F&B.
5. Upscale has highest year-over-year supply growth
Year-over-year data presented during the session showed that the upscale has the highest supply growth (5.2%) compared to June 2017.
Upper midscale comes second with 4.2% supply growth, while upper upscale trails behind at 3.4%.
STR data shows that there are 186,832 rooms under construction in the U.S., 63% of which are in upscale and upper-midscale segments.