The end of the good
times is near for U.S. hotels, according to CBRE Hotels’ 2016 Trends in the Hotel Industry report. A survey of 2015 year-end statements
from thousands of U.S. hotels suggests occupancy and revenue growth are slowing
while operating expenses are climbing.
From 2014 to 2015, occupancy increased in 56.9 percent of
the hotels sampled in the CBRE report, down from the more than 70 percent that
saw occupancy growth in recent years. "This clearly is an indicator that
hotels are approaching the top of the cycle, when occupancy is at near-capacity
levels," said CBRE senior managing director Mark Woodworth in a statement.
"In certain markets the negative consequences of new supply growth are
being felt."
In average daily rate terms, 86.1 percent of the properties
sampled managed to raise room rates during the year, and 80.5 percent also
increased their revenue per available room, which grew an average 4.6 percent
overall.
"In 2015, we saw continued improvement in the growth of
other hotel revenue sources beyond the rental of guest rooms," Woodworth
said. "During the year, food-and-beverage revenue rose by a healthy 6.6
percent, while miscellaneous income … grew by 25.4 percent."
Total operating revenue for the properties CBRE Hotels surveyed
increased by 5.3 percent overall from 2014 to 2015. But that gain looks less
healthy when examining total hotel expenses, which increased 4.6 percent in
real terms, the greatest annual change during the past 20 years, according to
CBRE.
The biggest contributors to increased expenses were total
labor costs and related expenses; that category grew 4.6 percent from 2014 to
2015. New legislation around minimum wage, living wage, overtime rules and
joint-employment regulations added to hotelier costs in this area since last
year.
The fees that hotels pay to credit card, franchise and
management companies also increased between 2014 and 2015. Management fees grew
by 4.9 percent, franchise fees increased 6.7 percent and credit card
commissions rose 7 percent. Meanwhile, hotels did see decreases in utility
costs, 2.7 percent, and food costs, 3.3 percent, due to lower energy prices.
As revenue growth still outpaced expense growth,
the U.S. hotels surveyed did see gross operating profits increase 6.3 percent
year over year. "After years of achieving record levels of occupancy and
double-digit growth in profits, U.S. hotels appear to have taken a breather in
2015," Woodworth said. "However, it should be noted that the industry
is not out of breath. Our forecasts call for continued RevPAR growth in the
near term, which should lead to persistent, albeit modest, gains in profits."