In the first quarter of 2012, the U.S. hotel industry saw its highest demand ever. That was a highlight of some of the good news American Hotel & Lodging Association (AH&LA) members received during presentations at the association’s annual Summer Summit held this week at the InterContinental Houston near the Galleria in Houston, Texas. Just as exciting for attendees was data indicating that hotel profits are indeed on the rise once again.
The data was presented by Vail Brown, vice president of global strategy and marketing for STR, kicking off presentations during the U.S. Lodging Industry Summit Panel. Brown, Greg Hybl, vice president and general manger, global client group travel and entertainment, American Express; Mark Woodworth, president, PKF Hospitality Research; and Chris Klauda, vice president, quality services, D.K. Shifflet & Associates let attendees in on some new data showing most good news for the industry, with some caution mixed in.
In Q1 2012, the U.S. lodging industry sold 245 million rooms, Brown said. That comes on the heels of $137.5 billion in revenue and $21.6 billion in profits the industry saw in 2011. “It feels like pricing power is starting to come back in our favor,” Brown told the audience. “All in all, it’s healthy performance and moving in the right direction.”
In addition, the numbers show that the average daily rate (ADR) recovery bodes well for 2012. Brown said the firm is forecasting ADR to rise 4 percent in 2012 and early indications are for a 4.6 percent rise in 2013.
While ADR numbers are encouraging, the strong ADR growth is still depressed compared to the benchmark year of 2007. The luxury scale, which typically serves as a leading indicator of overall industry rate climb, lags roughly $20 behind 2007 levels. The gap is closer in the remaining segments, with the upper midscale scale actually outperforming 2007 by $2, according to numbers for a 12-month period ending in April 2012.
In her presentation on “mythbusting” of several industry conventional wisdoms, Klauda pointed out that the midscale segment was actually well positioned for drop-down customers from the upper segments looking for value proposition.
In somewhat surprising data, Hybl indicated that luxury was seeing a benefit from Generation Y travelers more so than other generations, although he cautioned that the Gen Y segment remained relatively small in comparison to Gen X and baby boomers when it comes to travel-spend.
Woodworth largely seconded the projections put forth by Brown. He added that PKF is expecting occupancy to rise to more than 62 percent in 2013. However, he cautioned that consumer and business spending numbers were indicators to continue to watch as confidence in both sectors was largely tied to economic performance in the coming years. He also indicated that increased government regulations, including those on government travel, could impede growth.
While both Brown and Woodworth said they believed the industry is well into recovery mode, Woodworth said that history indicates that it “will probably be 2014 before we really start to feel like things are back to normal.”
However, considering the mood and depressing numbers of recent years, the presentations left attendees feeling a little better about things.