Hotels Post Strong Quarterly Performance
Hoteliers posted growth in room rates and revenue for the third quarter of 2006, matching or beating the expectations of analysts.
Overall, Smith Travel Research reported the U.S. lodging industry gained 6.8 percent in average room rate to $97.43 for the quarter, compared with the same period last year. Revenue per available room was up 6 percent to $66.71, and occupancy dropped 0.7 percent to 68.5 percent for the quarter.
The results matched reports from major chains in the past few weeks. Hilton Hotels Corp. last week reported a 33 percent increase in revenue to $649 million for its owned hotels during the quarter. Worldwide RevPAR for Hilton was up 9.8 percent for the quarter, spurred largely by rate increases and high demand in most major markets. In North America, the RevPAR increase was only 7.4 percent, but Hilton said renovations in New York and Hawaii affected that number. The Conrad brand scored the strongest gain, with a 13.4 percent rise in RevPAR.
Two weeks ago, Starwood Hotels & Resorts Worldwide reported revenues at same-store owned hotels up by 9.4 percent both in North America and worldwide. RevPAR was up 10.6 percent in North America and 11.7 percent worldwide. Growth particularly was strong in Atlanta, Chicago, Philadelphia and Toronto, according to Starwood.
Marriott International said average daily rates increased 9.1 percent compared with the same quarter last year, and revenue per available room was up 9.4 percent. Net income was down 5.4 percent because of Marriott's exit from the synthetic-fuel business earlier this year. Lodging revenue offset the $92 million decline in synthetic fuel revenues. Marriott's RevPAR was slightly above the 6 percent to 8 percent overall guidance issued by JPMorgan Securities' U.S. Equity Research earlier in October.
Although STR president Mark Lomanno recently told investors there has been a slight slowing of RevPAR escalation in the past few months, it's not good news for travel buyers looking for an edge in negotiations.
"The pricing seems to be holding up pretty firmly in most of the segments, particularly in the high-end segments," Lomanno said. "What's changed the dynamics a little bit is somewhat of a weaker demand than we anticipated."
Year-over-year demand growth comparisons are skewed somewhat by the impact of hurricanes Katrina, Rita and Wilma, he said. Overall, the industry remains strong with higher-end and luxury hotels getting good pricing and the upper upscale properties slightly weaker, he said.
In the meantime, Pricewaterhouse-Coopers amended its forecast at the end of October to say that the average daily rate in the U.S. lodging industry will climb by 6.9 percent for the year. This will make for a combined RevPAR growth of 8.7 percent, the largest since 1980. PwC forecast occupancy to climb to 64.2 percent, its highest level in a decade.
Lomanno expects the supply and demand line to cross in the fourth quarter of 2007. He predicted a 1.7 percent to 1.8 percent growth in supply, with a majority of the construction in the upscale and midprice without food and beverage categories.
Until then, however, the market should remain in the hoteliers' favor. While PwC predicts a slowdown of room demand growth in 2007, its analysts still expect a RevPAR growth of 5.9 percent for the year.