STR: Economy shows some worrisome signs

Roger Bloss, left, founder and CEO of Vantage Hospitality, with Jeff Higley of HotelNewsNow.com/STR.

Roger Bloss, left, founder and CEO of Vantage Hospitality, with Jeff Higley of HotelNewsNow.com/STR.

LAS VEGAS — Jeff Higley, vice-president digital media and communications at HotelNewsNow.com/STR told delegates at the Vantage Hospitality conference he sees signs another downturn could be coming. 

Higley's presentation included numbers from both the U.S. and Canada. Stateside, all the STR stats are in record territory — 67.4 per cent occupancy, ADR of $120.75 and RevPAR of $81.43 and total room revenue for the hotels they track at $1.22 billion, up 7.8 per cent from last year.

A healthy gap remains between supply and demand in the U.S., with demand exceeding supply growth for the foreseeable future. ADR has shown steady performance for four years, and rate has grown faster than occupancy since early 2011. 

Occupancy is up from a 2009 low of 54-55 per cent to 67.5, and RevPAR keeps rolling along, Higley said. “We have now had 62 months of RevPAR growth.”

What worries him most about the U.S. economy is that if you look at trends since the early 1990s, the downturns have been deeper and more severe. “It's important to have a plan, be ready, don't be caught flat-footed when the downturn comes.”

Canada's numbers are also “pretty healthy,” with occupancy at 66.5 per cent, down 0.5 per cent from last year. ADR stands at $145 ($Can), up 4.8 per cent, while RevPAR at $96 ($Can) rose by 4.5 per cent. Room revenue was $12.6 billion, an increase of 5.3 per cent.

Demand rates are slowing and supply could become an issue, Higley said, noting that for the first time in recent memory, demand levels are dipping below supply. Room supply grew at 1.0 per cent, while demand rose by 0.6 per cent.

On the other hand, ADR is taking off, even though occupancy is easing, a situation he labelled as “great.” Canada has also had 62 months of RevPAR increases on a 12-month revolving basis, mirroring the U.S.

Even in the U.S., Higley said he was “starting to get a little bit worried about supply growth,” with 150,000 rooms under construction. “New York is a bellwether — they have a lot of supply that will have to be absorbed over the next 24 months. There are 6,245 rooms under construction in Houston. Houston, you may have a problem!”

While openings have increased dramatically over the last four years, fewer hotels are being closed. In 2005, 833 hotels were closed in the U.S., partly due to the devastation of Hurricane Katrina, while year to date, only 95 have closed.

Higley offered good news for the Vantage hoteliers. “The chainscales are led by economy, mid and upper midscale. Next year should be a strong year as well.”  

Vantage's properties fit into those categories. In Canada, Canadas Best Value Inn is in the economy category, while Lexington is an upper midscale brand.