A report from Morgan Stanley Research suggests that a
decline during 2016 in the number of compression nights at U.S. hotels could
indicate a significant threat to the industry from alternative accommodation
providers like Airbnb.
In 2016 Compression Nights Deep Dive: Profit Contribution,
published today, equity analysts Thomas Allen and Mark Savino and research
associate Chaodan Zheng use compression nights as a proxy for the impact of
alternative lodging on traditional hotels.
Last year, compression nights, defined as nights when hotel
occupancy is greater than 95 percent, fell 17 percent year over year among the 25
U.S. markets with the most hotel rooms, the first time that's happened since 2009. Additionally, though occupancy remained more
than 1 percent higher in 2016 than in 2014, compression nights dipped 8 percent
below 2014 levels. "This would suggest that there are other factors
impacting hotels' ability to fill during busy times," the report states.
Because of the premium rates hoteliers can charge during
periods of high occupancy, compression nights represent a significant source of
profit for the industry. According to the report, compression nights comprised
only 3 percent of total room nights last year but made up 8 percent of hotels'
profits. Nights when occupancy was greater than 90 percent made up 11 percent
of total room nights and generated 28 percent of hotels' profits.
But are Airbnb and its counterparts to blame for fewer compression
room nights? The signs point to yes, according to Morgan Stanley. In another report—titled
Who Will Airbnb Hurt More—Hotels or OTAs? ... One Year Later—Morgan Stanley
found that Airbnb use rose from 12 percent of travelers in 2015 to 18 percent
in 2016. That trend, the firm says, is expected to continue in 2017.
Morgan Stanley's conclusions about Airbnb's
impact on compression nights run counter to an STR analysis published
Hotel News Now in February 2016. That analysis examined compression nights in
Manhattan between November 2013 and December 2015 and found "little
evidence that Airbnb is leading to fewer compression nights or reducing pricing
power on those nights." According to the Morgan Stanley report released
today, however, New York City proved an anomaly in 2016, as the city saw an
increase in compression nights in spite of notable supply growth of traditional
hotels.