The TravelClick Perspective

The TravelClick Perspective – February 2014: A Promising Outlook for 2014

The hotel industry outlook for the top 25 North American Markets is showing an increase of 4.2% in committed occupancy for February 2014 - January 2015, based on group commitments and individual reservations on the books as of January 26, 2014 compared to the same time last year.

TravelCLICK The hotel industry outlook for the top 25 North American Markets is showing an increase of 4.2% in committed occupancy for February 2014 - January 2015, based on group commitments and individual reservations on the books as of January 26, 2014 compared to the same time last year. The group segment is up 3.8% in room nights committed (contracted). New group business added over the last month (pace) are up, 10.1% over the comparable period last year. Transient room nights booked are up 5.7% compared to the same time last year. Average daily rate (ADR) is growing slightly above occupancy, up 3.2% based on reservations currently on the books for 2014.

For the first quarter of 2014, overall committed occupancy is up 2.9% in the top 25 markets. Committed occupancy for the group segments is up 3.5% and the transient segment is up 2.4% compared to a year ago. Average daily rate for the first quarter is up 2.9% over the same time last year. Business segment ADR, which includes weekday transient negotiated and retail segments, is up 3.2%. Leisure segment ADR, which includes transient discount, qualified and wholesale segments, is up 3.2%.

A Promising Outlook for 2014

If you happened to listen to the January/February quarterly earnings calls of the major publicly traded hotel chains (e.g. IHG, Marriott, Starwood, Hyatt, Choice) and REITs (e.g. Host, Hersha), you would have heard a rather consistent set of messages regarding the outlook for 2014. The consensus on RevPAR growth this year is that it will be slightly better than last year, with expectations falling in the 5-7% range. Growth expectations are higher at the upper end of the market (upper upscale and luxury properties), with expectations at the economy and mid-scale segments falling in the 3-5% range. Other key messages were that RevPAR growth will be more balanced between occupancy and average daily rate (ADR) growth, and that the transient segment will continue to lead the way in this growth.

However, there were positive indications from most companies that group demand is stronger now than it has been over the last year. Most are reporting group pace to be up by 3-5% over last year. With as much as 70% of the 2014 group demand already on the books, this is a strong indicator of expected group performance for the year. While the consensus outlook is strong, there were some cautionary notes regarding risks. The primary concerns were the effects of economic headwinds in the emerging markets (especially in the face of higher supply growth) and lack of strong income and employment growth in the US.

The outlook reported by these owners and operators of hotels is very consistent with TravelClick's view of the market, which comes from aggregated future-looking group sales and reservations data collected from major hotel chains and independent hotels. The table below shows the current outlook for 2014 based on group commitments and reservations on the books versus the same time last year.

Table - Hotel Bookings 2014 vs Same Time Last Years

As you can see, we share the more bullish outlook for the group segment. While occupancy growth for group was basically flat in 2013, we see that contracted group room nights for 2014 are currently ahead of last year by 3.5%. As mentioned above, given how far in advance groups book, this early pace is a strong indicator of expected performance for that segment. While the transient segment booking window is much shorter than group, early indications are that the transient segment will continue to perform well in 2014. Transient occupancy and ADR growth are both moderately strong. The transient themes of 2013 continue, with growth being led by the retail and discount segments, while the qualified segment is still struggling. The weaker performance of the transient qualified segment is largely due to continued softness in government demand.

The news from all fronts remains positive. But as the saying goes, 'your results may vary'. Industry fundamentals are favorable. It is up to each individual operator to use experience and sound judgment along with the best available data and tools to drive superior outcomes.

As you can see, we share the more bullish outlook for the group segment. While occupancy growth for group was basically flat in 2013, we see that contracted group room nights for 2014 are currently ahead of last year by 3.5%. As mentioned above, given how far in advance groups book, this early pace is a strong indicator of expected performance for that segment. While the transient segment booking window is much shorter than group, early indications are that the transient segment will continue to perform well in 2014.

Transient occupancy and ADR growth are both moderately strong. The transient themes of 2013 continue, with growth being led by the retail and discount segments, while the qualified segment is still struggling. The weaker performance of the transient qualified segment is largely due to continued softness in government demand.

The news from all fronts remains positive. But as the saying goes, 'your results may vary'. Industry fundamentals are favorable. It is up to each individual operator to use experience and sound judgment along with the best available data and tools to drive superior outcomes.

Performance Summary

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.

Table - U.S. Hotel Industry Performance Year Over Year - By Key Cities

TravelClick_Perspective_February_2014.pdf

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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