Summary:
- The US hotel industry reported positive results in the three key performance metrics during Jan-2019, according to data from benchmarking specialist STR;
- The industry once again set a demand record with more room nights sold than any other January on record, but overall performance growth was again muted;
- The annual American Football Super Bowl retains a profound effect on hotel rates.
In a year-over-year comparison with January 2018, the industry posted an occupancy rise of +0.7% to 54.8%, a +0.8% rise in average daily rate (ADR) to USD124.39 and a +1.5% increase in RevPAR to USD68.13.
The industry once again set a demand record with more room nights sold than any other January on record, but overall performance growth was again muted, specifically on the rate side, with the lowest increase in ADR since July 2010. "Our projections for the year remain the same - good, not great performance, thanks in large part to tepid ADR growth," notes Jan Freitag, STR's senior VP of lodging insights.
Among the Top 25 Markets, San Francisco/San Mateo, California, reported the highest jump in RevPAR (+12.0% to USD220.88), which was due to the only double-digit increase in ADR (+12.6% to USD302.68). New Orleans, Louisiana, experienced the largest rise in occupancy (+5.7% to 64.5%), while Phoenix, Arizona, saw the second-largest increases in occupancy (+5.2% to 73.6%) and RevPAR (+10.6% to USD111.07).
The annual American Football Super Bowl retains a profound effect on hotel rates. Last year's host, Minneapolis/St. Paul, Minnesota, reported the other largest drop in RevPAR (-17.2% to USD54.13) in Jan-2019, primarily because of the only double-digit decrease in ADR (-10.2% to US$105.26). At the other end of the scale, initial STR data for Feb-2019 show positive signs in key hotel metrics.
For the week of 3-Feb-209 to 9-Feb-2019, hotel occupancy across the US was up 0.2% year-on-year to 59.9% while ADR increased to USD126.68. RevPAR grew 1.7% year-on-year to USD75.84, and among the top 25 markets was Atlanta, host to the 2019 Super Bowl. Its RevPAR increased by a third (33.2%) year-on-year to USD101.45, due to a rise in ADR of 31.9% to USD147.83.
Hotel transactions across the US hit a decade high, but are expected to slip this year. Data from the Hotel Transaction Almanac produced by STR's Consulting & Analytics office and Hotel Brokers International (HBI), records a total of 707 property sales last year totalling USD29.5 billion and made 2018 the most active year for hotel transactions since 2007. The total number of transactions grew 25% from 2017, while sales volume was up 49% from the previous year.
"We're near the peak of the cycle right now where there is opportunity for very large profits," says Joseph Rael, STR's senior director of consulting & analytics. "Buyers feel that they can pick up strong short-term returns and gain an asset in an attractive market, while owners like the large valuations with economic uncertainty on the horizon."
The study found Washington DC was the most active market with 27 transactions at an average price per room of USD265,000, while Atlanta ranked second with 23 sales. Miami achieved the highest price per room at USD539,000, followed by New York City at USD505,000.
The highest priced individual property transaction was the Waldorf Astoria Grand Wailea, which sold for USD1.1 billion - this price ranked second all-time among individual sales included in the Hotel Transaction Almanac. The four next highest priced sales, all above USD400 million, came in San Antonio, New York City, Miami Beach and Phoenix.
Hotel companies accounted for 26% of acquisitions with known buyers in 2018, up from 18% in 2017. Sales to foreign investors more than doubled from 32 in 2017 to 72 in 2018. Private-equity firms saw the greatest growth in 2018 of all buyer types, up from 31 transactions in 2017 to 114 in 2018.
"We expect less transaction activity in 2019 with asset pricing similar to the levels from 2018," predicts Mr Rael. "Strong projected operating fundamentals should be balanced by increased rates and broader economic concerns."
Meanwhile, a new survey by Luxury-Hotels.com has named The Ritz-Carlton as the most expensive hotel in New Orleans, after comparing prices at every luxury hotel in New Orleans during Feb-2019 and Mar-2019, the two months when hotel rates in the city peak each year.
At USD386 for the least expensive double-room, the Ritz-Carlton, set within a historic building in the heart of New Orleans' French Quarter, was 10% more expensive than any other property in the city. Soniat House, a historic boutique property also in the French Quarter, came out as the second most expensive hotel with a rate of USD350 per night for the most affordable room.