Inbound Demand

The U.S. economy has settled into a period of sustained growth, albeit slower than desired with some lingering overhanging issues, including high unemployment, high deficits, and a still-languishing housing market. Against this backdrop, the demand outlook for the hotel industry remains positive.
Occupancy for full year 2011 is currently 6 percent higher than the same time last year. Group commitments are up 6.8 percent. New group business added in the past month is up 30.8 percent over the comparable period last year. Transient demand is running 4.4 percent ahead of last year. Average daily rate (ADR) growth has returned, up 2.4 percent year-over-year. Transient ADR is up 3.7 percent. Group ADR is flat, which, given its long stay in negative territory, is positive news indeed.

International inbound travelers are an important source of demand for U.S. hotels. While the entire global economy was impacted by the recession, the severity varied by country. The developed economies of Europe and the U.S. fell the furthest and have recovered more slowly. The developing countries, on the other hand, shook off the effects of the recession more quickly, and their torrid rate of growth soon returned.

How have these dynamics affected U.S. inbound demand from other countries? To answer that question, we analyzed the demand data Rubicon receives from the major hotel companies. We looked at international inbound demand for the fourth quarter of 2010 and demand on the books for 2011, compared to the same time last year. We focused on the following source markets: Europe (U.K., Germany, France, Spain); BRIC countries (Brazil, Russia, India, China); and others including Japan, Australia, and Canada. We included transient guests only.


Europe | In Q4 2010, demand from the four European countries included in our analysis strengthened year-over-year. In aggregate, demand growth from Europe was similar to U.S. domestic demand, with room nights increasing by 7.1 percent and ADR remaining flat, down slightly by 0.5 percent. However, there was large variation by country. Demand from the U.K. was quite strong, up 13.9 percent. Demand from Germany and France was up slightly, by 2.9 percent and 2.3 percent, respectively. But demand from Spain, where economic conditions remain the most challenging, was down 23.3 percent year-over-year.

The current outlook for 2011 is not as positive. Based on reservations currently on the books for 2011, inbound demand from the selected European markets is lagging same time last year by 12 percent. ADR is more favorable, currently up by 3.6 percent. Spain is again the weakest source market, down from 2010 by more than 46 percent.

BRIC | Demand from the four countries that comprise BRIC mirrors the supercharged growth environment of these countries, in particular China, India, and Brazil. For Q4, 2010 BRIC demand was up by 39.2 percent year-over-year. China led the block, up by 52.3 percent. India, Brazil, and Russia followed, up by 38.2 percent, 34.6 percent, and 27.5 percent, respectively.

2011 demand from BRIC countries is to this point not as strong as Q4 2010. Demand is up by 5.3 percent. China again leads the way, with 2011 bookings up by 17.5 percent, followed by Brazil (13.9 percent), Russia (6.9 percent), and India, which is actually down by 9 percent. ADR is running 9.6 percent ahead of same time last year, so the RevPAR contribution from these source markets is very favorable.

The rest | We looked a several other key inbound markets including Canada, Japan, and Australia. For Q4 2010, demand from these markets was quite strong, growing as a group and individually at a faster pace than the European market. Japan led the way in demand growth, up 21 percent. Australia followed closely, up 20.3 percent. Demand from Canada reflected U.S. domestic demand conditions, up 12.6 percent year-over-year. ADR for the group was up 2.6 percent.
Business currently on the books for 2011 is almost flat versus last year, up by only 0.8 percent. Demand from Australia is up 8.3 percent, but demand from Japan (-4.7 percent) and Canada (-0.8 percent) is lagging same time last year. Strong ADR increases across these countries (7.6 percent) are driving positive RevPAR contribution.

Tim Hart executive vice president and head of business intelligence, Rubicon, a Travelclick Company,