admin, March 19 2019

Hotel supply and demand in the U.S

The U.S hotel industry is enjoying a prolonged period of prosperity. Following a 10-year upward trend of strong year-over-year growth. Incomes are rising, supporting increased demand and occupancy for hotels and similar transient services. This, in part, may be responsible for the continued increase in both ADR (average daily rate) and occupancy.

Room supply rates

The average increase in rooms under construction is up 4.5% when compared with January of 2018. The top five markets in the country; New York City, Las Vegas, Dallas, Los Angeles, and Orlando, saw a new supply growth that exceeded demand growth.

Occupancy rates & ADR

In 2018, Nationwide hotel demand growth outpaced supply by 0.5%, with demand growing 2.5% YoY (year over year), and supply growing by 2%. Demand for luxury hotels decreased, yet overall occupancy rates continued a 10 year high. Coupled with an increase in revenue of 2.4% per room.

The nationwide occupancy rate was at 66.2% in 2018. For the leading cities, the rates changed as follows for 2017 through to the end of 2018.

Las Vegas 88.2%, a decrease of 3.1%. ADR up by $0.79 for a total of $151.00 New York City 87.3%, a 0.8% increase. ADR up by $2.70 for a total of $262.31 Los Angeles 80.6%, a decrease of 1%. ADR up by $5.03 for a total of $186.54 Dallas 70.1%, a decrease of 0.4%, ADR up by $3.57 for a total of $109.65

Predictions and concerns looking towards the future.

In 2019, average occupancy rates are expected to rise by 0.2% along with a 2.3% increase in ADR. This can likely be attributed to the continued increase in real income, as well as business spending.

The hotel industry is likely to enjoy a prolonged period of growth, as the U.S economy is projected to maintain a steady GDP growth rate of 2.6 to 3% through to 2020.

Increasingly stringent requirements for tourist visas, coupled with toughening immigration policies may prove to hurt hotels. While revenue continues to grow, top hoteliers are reinvesting into marketing, development, and renovations. Resulting in lower profits.

Lastly, alternative lodgings and home-sharing services such as Airbnb continue to cut into hotel revenue across the nation, particularly in cities with higher hotel occupancy rates as well as the midwest in cities like Columbus and Indianapolis

In conclusion

Despite increasing competition and a reduction of incoming international tourism, the outlook looks positive, with steady growth following an 11-year trend there are no apparent large threats to the economy or the hotel industry in particular in the coming years. Provided that hoteliers keep track of consumer demands and reinvest in creating experiences that meet those demands.


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