The hotel industry outlook for the top 25 North American Markets is showing an increase of 3.3% in committed occupancy for January 2014 - December 2014, based on group commitments and individual reservations on the books as of December 29, 2013 compared to the same time last year. The group segment is up 2.7% in room nights committed (contracted). New group business added over the last month (pace) are down, -14.2% over the comparable period last year. Transient room nights booked are up 5.3% compared to the same time last year. Average daily rate (ADR) is growing slightly above occupancy, up 3.9% based on reservations currently on the books for 2014.
For the first quarter of 2014, overall committed occupancy is up 2.4% in the top 25 markets. Committed occupancy for the group segments is up 2.3% and the transient segment is up 2.6% compared to a year ago. Average daily rate for the first quarter is up 3.7% over the same time last year. Business segment ADR, which includes weekday transient negotiated and retail segments, is down -0.6%. Leisure segment ADR, which includes transient discount, qualified and wholesale segments, is up 4.8%.
2013 Year in Review and 2014 Outlook
As we begin a new year, it is a good time to review performance of the prior year and to also see how the coming year is shaping up, based on advance reservations activity. We will profile the performance and outlook of the top 25 North American markets, covering performance by market segment, by channel (for the transient market segment), and by individual online agency (for the online travel agents channel).
We will first look at performance by market segment.
The group segment, which accounted for 25% of the room nights in 2013, experienced no room night (occupancy) growth last year. Fortunately, the average daily rate grew 2.5%, meaning that the group segment contributed positively to overall revenue per available room (RevPAR) growth. Nevertheless, the performance of the group segment cast a worrisome shadow over industry performance for most of the year.
The group outlook for 2014 is stronger, with group room night commitments for the coming year up 2.7% over same time last year. We estimate that approximately 60% of the group business for 2014 is already on the books. The group outlook for 2014 looked stronger a few months back. However, recent new group sales pace has been sluggish and the group position has deteriorated. While we are still ahead of where we were last year, it does not appear that we are completely out of the woods in the group segment.
The transient segment was the primary driver of RevPAR growth in 2013. Transient room nights grew by 3.7% Transient ADR grew 3.4%. Every individual transient customer segment was strong, except one. The Transient Qualified segment was down 3% in room nights, due to weakness in the government sector.
The early outlook for transient demand in 2014 is strong. Room nights on the books are up 5.3% versus the same time last year. ADR is up 5.2%. While less than 10% of 2014 transient demand was on the books as we entered the New Year, given the shorter transient booking window, the early results show that the transient segment will continue to power RevPAR growth, at least for the first part of 2014.
Transient growth heading into 2014 is driven first and foremost by strong leisure demand, with the Transient Discount segment ahead of the same time last year by 14.5%. ADR in the discount segment is also growing strong, up by 8%. Transient Retail growth is positive as well, and while the Transient Negotiated segment room night growth is lagging, ADR for 2014 is trending up, ahead of last year by 4.3%. This indicates that hotels had some success during the fall RFP season achieving higher corporate negotiated pricing.
Taking a look at performance by distribution channel, we will focus on the transient segment only.
The online booking channels, which include the hotel company brand.com sites and the online travel agencies (OTA), accounted for over 40% of all transient room nights in 2013. Brand.com is the dominant overall channel, with a 27% share of transient rooms nights sold. It continued to grow strong in 2013, with Brand.com room nights up 7.6% year over year. That growth was second only to OTA room night growth of 15.2%, which continued to be the dominant channel for leisure guests. The GDS (travel agents) channel growth was moderately strong, up 3.5%. But within the transient negotiated segment, where the GDS accounts for 50% of all room nights booked, GDS growth was 4.3% year over year. Strong business demand continues to drive healthy results for the GDS channel.
Early booking leisure customers are driving the channel story heading in to 2014. The OTA channel is currently 40% ahead of same time last year in room nights on the books.
Let's now look in more detail at that OTA channel, focusing on the Transient Discount (or leisure guest) segment.
The three dominant OTA sites in 2013 were Expedia, Priceline and Booking.com, whose share of transient discount (leisure) bookings were 39%, 16% and 11%, respectively. Their growth rates in the top 25 North American markets were radically different. Expedia room nights grew 30%. Priceline room nights fell 11%, ostensibly due to the weakness of the opaque channels in this less-distressed occupancy environment (Expedia's Hotwire site saw room nights fall 13% year over year). Booking.com (a Priceline company) room nights grew 100%, as their push into North America continued.
The outlook for 2014 is much the same, with booking activity for most of the non-opaque sites up very significantly over same time last year. Leisure demand strength is driving some very good results for the online travel agency channel.
In summary, 2013 was an overall good year for the industry, despite some pockets of weakness, particularly the group and government segments. Those weak spots appear to be strengthening somewhat as we head into 2014. This positions the industry for even stronger RevPAR growth in 2014.
The chart below shows the year-over-year position by market of committed occupancy, reserved occupancy, ADR, and revenue per available room (RevPAR), based on business on the books for the future 12 months. Committed occupancy is group blocks plus transient reservations. Reserved occupancy, ADR, and RevPAR are based only on reservations (group pickup and transient reservations). Shades of green indicate highest performance of the markets, while shades of orange indicate average performance, and shades of red indicate lowest performance.
About TravelClick, Inc. TravelClick (TravelClick.com) provides innovative cloud-based solutions for hotels around the globe to grow their revenue reduce costs and improve performance. TravelClick offers hotels world-class reservation solutions, business intelligence products and comprehensive media and marketing solutions to help hotels grow their business. With local experts around the globe, we help more than 36,000 hotel clients in over 160 countries drive profitable room reservations through better revenue management decisions, proven reservation technology and innovative marketing. Since 1999, TravelClick has helped hotels leverage the web to effectively navigate the complex global distribution landscape. TravelClick has offices in New York, Atlanta, Philadelphia, Chicago, Barcelona, Dubai, Hong Kong, Houston, Melbourne, Orlando, Shanghai, Singapore and Tokyo. Follow us on twitter.com/TravelClick and facebook.com/TravelClick.
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