Record-breaking US hotel industry: healthy through 2009
The US hotel industry had another record breaking year in 2006.
Based on statistics compiled by Smith Travel Research (STR), the industry generated $133.4 billion in total revenues and $26.6 billion in profits. Both numbers are industry records.
Revenues increased by 8.7% from the $122.7 billion generated in 2005 and profits increased 17.9%, up from $22.6 billion last year.
Mark Lomanno, president of STR, said:
“Strong Average Daily Rate (ADR) growth of 7.2% fueled increased industry profitability. Relatively modest demand growth of 0.7% helped bolster operators’ pricing power as occupancy levels exceeded 63%. While such strong rate growth is not sustainable, the expected rate growth for the coming years is still well above the rate of inflation.”
Randy Smith, owner and founder of STR, said:
“Profit margins increased to almost 20%, up from 18.4% last year. It is also worth mentioning that of the $10.7 billion in additional revenues the industry generated, over $4 billion flowed through to the bottom line.”
Although hotel construction pipeline numbers have increased, it seems construction time has lengthened, he noted.
In addition, new supply is regionally distributed and only a few major cities face potential overbuilding.
“We estimate new supply increases will have a slightly negative effect of -0.7% on occupancy in 2007. But ADR growth, while slowing, is projected to still be strong at around 6.0%. Fueled by this increase, 2007 will mark the first year that industry ADR breaks $100, another milestone in the industry’s history,” he said.
He predicted the industry would remain healthy through 2009 at least.
Report by David Wilkening
David
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