Lodging Recovery

By now it is no big surprise: room demand is recovering, and average daily rate growth is showing signs of a recovery that is expected to be sustained in 2011. This article discusses the current performance of the U.S. by census regions and highlights trends across the nation.

Through August 2010, U.S. revenue per available room increased 4 percent, driven by an occupancy increase of 5 percent and rate decline of -1 percent. Regionally, the New England and Mid-Atlantic regions were the best performers with RevPAR growth of 9.1 percent and 9.9 percent, respectively. The New England region’s performance was boosted by the states of Massachusetts with a RevPAR increase of 11.3 percent and Rhode Island, where RevPAR jumped 10.5 percent. Not surprisingly, the Mid-Atlantic region was dominated by New York’s 12.9 percent RevPAR growth. In addition, the region had the second highest occupancy (63.8 percent) and highest ADR ($131). It is worth noting, though, that New York City disproportionately skewed results for the state and the region with a RevPAR growth of 15 percent, based on equal increases in ADR and occupancy.

Hotels in the East North Central region, including states from Ohio to Wisconsin, reported occupancy growth of 7.1 percent and a RevPAR increase of 5.5 percent. Wisconsin was the top performer, with almost no rate loss (-0.5 percent) and a strong RevPAR increase (7.1 percent). On the West Coast, hoteliers  in the Pacific region experienced an occupancy increase of 6 percent and a 4.7-percent rise in RevPAR. Alaska dominated the occupancy increase by 8.6 percent, to an absolute level of 68.3 percent. Further proving the strength of this region, Hawaii had the highest state occupancy with 71.2 percent through August.

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In the middle of the country, the 11 states of the West North and West South Central regions (from North Dakota to Texas) reported relatively muted occupancy growth of 3.2 percent and 1.4 percent, respectively. In the West South Region, only Louisiana reported positive RevPAR growth (7.2 percent). In contrast in that region, RevPAR in Arkansas (-2.7 percent), Oklahoma (-1 percent), and Texas (-2.3 percent) eroded even further. Arkansas is also still the only state in the union with an annualized occupancy of below 50 percent. Further north, North Dakota hoteliers increased their rates by 7.3 percent, the highest ADR growth rate in the US.

In the Mountain region, RevPAR growth was muted, as occupancy increases of 3.8 percent were offset by an ADR decline of -2.7 percent. Montana and Utah had the strongest year-to-date performance, and their RevPAR increased 6.7 percent and 4.7 percent respectively. Colorado ($104) is one of only 13 states with ADR of more than $100.

As to be expected in a diverse nation, the recovery cannot be observed equally across all regions and states. The coastal areas are experiencing a demand recovery more quickly than the rest of the country, and those regions are expected to show rate growth sooner. The recovery in the heartland appears to be still a while off. It will be interesting to observe the mentality and reactions of hoteliers in the states that had been harder hit during the recession to see if they will follow the overall positive sentiments.

Jan D. Freitag is vice president of global development at Smith Travel Research.