Top 25 U.S. markets have ground to make up

The top 25 markets in the United States have some work to do to get back to previous operating levels.   The markets need to make up, on average, US$17 in rate and 1.25 million rooms sold to make up the ground lost to the recent downturn, STR COO Brad Garner said during the Hotel Data Conference sponsored by STR and HotelNewsNow.com and presented by Gaylord Hotels.  “The way these numbers decrease seems to keep getting worse (during each downturn),” Garner said of operating fundamentals. “But the snapback is still there.”  During the previous downturn earlier this decade, it took the markets 52 months to make up US$9.35 of ADR. The markets still have to make up US$18 of ADR 22 months into the current downturn.   “We’re sure it’s going to go back up,” Garner said of ADR, “but at what kind of pace?”

The markets comprising the top 25 (which excludes Las Vegas) is a sizable chunk of the U.S. hotel industry. The group represents approximately 11,500 properties, 1.5 million rooms and accounts for 42% of the country’s revenue and 31% of supply.  Rate year-to-date for the top 25 through June is down 2.3% to US$116.89, he added. But revenue per available room has increased by 3.9% to US$73.87 and occupancy is up 6.4% to 63.2%.  “We’re of the belief that rates have been pre-negotiated so it could be sometime before we see growth,” Garner said. “There’s a choppy road ahead.”  Rate growth might not resume until the end of 2011, he said.  Through June, occupancy was higher every day of the week when compared to the same period in 2009. Transient demand is also at a higher level than it was in 2008 and 2009, Garner said.  “If transient demand is back,” Garner asked attendees, “why aren’t we charging for it?”

Transient average daily rate lags 2008 by US$22, or 17%, and room nights sold trail 2008’s level by 106,000 rooms, Garner said.  “There’s been a major reset of pricing,” he said.  New York has had a big effect on the top 25, Garner said.  With New York out of the equation, year-to-date ADR losses drop to 2.6% from 2% for the total U.S.  “For New York to make it move six-tenths of a point is tremendous,” Garner said. Demand gains, meanwhile, would fall to 8.3% from 8.8% when compared to the top 25 if not for the Big Apple.   While New York is at its peak in terms of rooms sold, rate is still US$62 away from its peak reached in September 2008.  There could be a little bit of an AIG-effect going on in New York, he said.  “My sense is transient has held up very well,” Garner said. “But no one booked a large amount of rooms; no one wanted to be viewed as that CEO who was being excessive (by booking group rooms in New York).”  From Hotel News Now…..