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NEW YORK — The first quarter was a disappointment for three of the largest hotel markets in the U.S.
New York, Chicago and Philadelphia all had significant declines in revenue per available room, according to STR data, and the sluggish performance prompted STR to revise its forecast for 2019 from 2.3% growth to 2% growth.
Despite continued high occupancy, New York City RevPAR was down 4.2% for the quarter. One possible factor: An oversupply of hotel rooms may be pushing down prices, STR said.
Chicago saw RevPAR slip 3.3% due to softness in group and non-group business, while Philadelphia’s RevPAR fell 6.4%, with group occupancy and RevPAR dropping 19% and 14%, respectively.
“We had a really weak first quarter and that was really unexpected, even with the Easter calendar shift,” said Vail Ross, STR’s senior vice president of global business development and marketing. “There are some big markets, from a rate standpoint, that are not growing as fast as they did in 2018. Right now, RevPAR year to date is not that strong. It’s only up 1.4%, so that really speaks to the challenging first part of the year. However, it’s important to note that the that overall RevPAR growth for the 12-month moving average is 2.2%, so we’re hoping the rest of the year will be strong and get us up to that 2% mark.”
Minneapolis and Houston also had RevPAR declines, though those two markets faced tough comparables – the Super Bowl in February 2018 in Minneapolis and high demand for shelter in the Houston area in Q1 2018 after Hurricane Harvey.
Other U.S. cities, however, fared better in the first quarter. Ross said Orlando, San Francisco and Nashville “elevated the overall U.S. performance.”
Along with lower RevPAR projections, STR also downgraded its growth projection for average daily rate (ADR) from 2.3% to 1.9%. That decrease, according to Ross, is particularly worrying.
“If you look at real ADR, or ADR minus inflation, the growth rate is flat,” Ross explained. “The concern is that other expenses like labor and cost of utilities are up, and they’re growing at a faster pace than our ability to grow overall room revenue. That causes problems from a profitability standpoint, and the margins are not going to be as large as we saw in the past.”
Outside of RevPAR and ADR, other metrics within STR’s initial 2019 forecast have largely remained the same.
Occupancy is still projected to be relatively flat, while supply is expected to grow 1.9%. Demand growth was modestly upgraded from 1.9% to 2%.
Source: travelweekly.com
