2009 will likely rank as one of the worst years for the United States hospitality industry in modern history. The week of June 27, this drop off entered a dangerous new phase - when compared to the same week, year over year, the national hotel average room rate began to fall more rapidly on a percentage basis than the average hotel occupancy percentage. This trend has now continued over the past eight weeks.
In early July, Smith Travel dramatically adjusted its forecast for 2009 hotel performance downward. Most significantly, full year RevPAR was forecast to fall 17.1%, a steep correction from the 9.8% decline predicted in STR's April forecast for 2009 performance. In the press release, STR President Mark Lomanno commented 'To a large degree, the industry is in a bit of a panic mode. People are only as strong as their weakest competitor in this environment, so when people are cutting and running, they feel compelled to join along. We think that's going to linger.' These are strong words coming from a well respected organization that is normally known to describe hospitality industry market conditions from a 'glass half-full' perspective.
Looking at the 12-month moving averages for the US hotel industry to smooth out seasonal fluctuations, property occupancy peaked during the week of October 6, 2007 at 63.99%. Average rates however continued to climb for the ensuing year, until the week ending September 27, 2008, when they reached $106.68. Due to the timing gap between the average rate and occupancy peaks, revenue per available room at peaked nearly 3 months earlier during the week of July 5, 2008 at $66.62. Simply put, this means the US hotel industry occupancy, in aggregate, has been declining for over 94 weeks since October 2007, rates have been dropping continuously for over 43 weeks since September 2008, and RevPAR has been falling for 55 weeks since July, 2008.
But the 12-month moving averages don't tell the whole story, as such calculations can mask small glimmers of hope that might be reflected in the reporting of the weekly statistics. No such luck on that count. Since the 12-month moving average ADR peaked in September, 2008, there has been one lonely week (the one ending December 20, 2008) where all three benchmarks (ADR, Occ% & RevPAR) did not decline. That is 41 out of 42 weeks where there were declines in every measure of aggregate US hotel performance compared to the corresponding week the previous year. These are not healthy trends.
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Source - Gerson Lehrman Group
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