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A publication of
Winter issue 2016 sponsored by
CRE Finance World Winter 2016
25
STR, Inc. US Hotel Performance
In order to better understand how the decline in hotel performance
occurred during the recession, data was reviewed from 2008-2015
for the categories of RevPAR, Supply & Demand, Occupancy and
Revenue. Some clear trends emerged.
The decline in occupancy led hotels into the recession and was the
first performance metric to improve after the trough was reached
in May 2009. Annual occupancy increased during 2010 while the
ADR suffered a decline during the same year. Hotel operators
maybe have been pushing down rate in order to bolster occupancy.
RevPAR had a period of 19 consecutive months of year over
year declines starting in August 2008. During the same period it
dropped by almost 30%. Supply increased by almost 3% during
calendar 2009 with a near 2% increase during 2010. Since 2011
however, supply nationally has largely remained in check with less
than 1% of inventory added each year. There are and will always
be regional variances to this as new supply in New York in 2015
and 2016 for instance is far above the national level. The only
annual revenue decline during the whole cycle occurred during
2008 with a decrease of -14.3%. This was the first annual decline
in revenue since the effects of 9/11 disrupted the US travel market
during 2001. Annual revenue has since rebounded strongly within
a range of almost 6%-9%.
RevPAR
• 2009 had largest year over year decline in RevPAR of -16.6%
• Each month during 2009 except December experienced double
digit decline year over year
• May 2009 had greatest monthly RevPAR decline over prior year
of 20.4%
• 19 consecutive months of YOY RevPAR declines running from
August 2008–February 2010
• Over same 19 month period, RevPAR peaked at $72.18 in August
2008 and troughed at $51.13 in February 2010 — a drop of
$21.05 or almost 30%
• Full year RevPAR peaked at $65.54 in 2007 and troughed at
$56.45 in 2010 — a peak to trough drop of $9.09 or 14%
• It took 6 years for full year RevPAR to pass pre-recession peak.
$65.54 in 2007 — $68.47 in 2013
Supply & Demand
• Largest annual increase in supply occurred during 2009 at 2.8%
with approximately 48,000 new rooms added to inventory
• Additional 1.7% increase in supply during 2010 but then annual
increases below 1% for the years from 2011–2015
• First annual decline in demand since 2001 (events of 9/11)
occurred during 2008 with -2.5% followed by drop of -6.2%
during 2009
• Demand bounced back quickly with 7.3% increase during
calendar year 2010
• Positive increases in demand each year from 2011–2015 within
range of 2%–4.7%
Occupancy
• First annual decline in occupancy during cycle occurred during
2007 at -0.5%
• Largest annual decline in occupancy came during 2009 of -8.8%
• 3 straight years of annual occupancy declines from 2007–2009
• Occupancy drove initial recovery during calendar 2010 with an
increase of 5.6% while ADR suffered a decline of -0.1% during
the same year
Revenue
• Flat revenue growth during 2007 of 0.3%
• Only revenue decline during the cycle occurred during 2008 with
dramatic decrease of -14.3%
• 2008 represented first year of annual revenue decline since
2001 which was -0.45% but was largely driven by events of 9/11
• Annual revenue has increased from 2011–2015 within a range of
5.8%–9.0%
Trepp CMBS Hotel Loan Delinquency
Prior to 2009, the CMBS hotel loan delinquency rate was consistently
below 1% and opened 2009 at 1.72%. The rapid decline in hotel
performance during the year resulted in a year end delinquency
rate of almost 14% — by far the greatest annual increase in loan
delinquency in the recent past. While it took only 11 months for
the hotel delinquency rate to rise from (rounded) 2% to 14%; 80
months after the delinquency rate first hit 14%, the delinquency rate
at 2.9% is still not down to the pre-recession level of 2% or below.
2009 Was The Trough But Will 2015 Be The Peak For US Hotels?
“Average Daily Rate (ADR) growth
continues to look for a firm footing,
despite peak occupancy levels.”