Feb022015

2014 Hotel Industry partying like it’s 2005

2014 was a record year for the hotel industry in the U.S. Two years ago, I attended the January 2013 Americas Lodging and Investment Summit in Los Angeles. The industry bigwigs at that conference went on and on about how business was great. The past two years’ data numbers seem to uphold their enthusiasm. 2014 sees the hotel industry partying like it’s 2005.

STR.com is the American hotel data firm that tracks hotel industry room rates and occupancy across the USA. Jan Freitag, senior VP STR, published a piece last week: U.S. Industry ends ’14 with a bang. The Hotel News Now article lists five data points from 2014 defining domestic hotel industry achievements.

1. 2014 was the ‘Most Ever’ with 1.8 billion rooms available and 1.1 billion room nights sold. Hotels generated $133 billion in revenue.

Room rates achieved record room rates at $115.

$115 might look like an appealing room rate for many travelers who are used to $200+ per night rates. Remember this data includes thousands of hotels in mid-scale and economy hotel brands like Days Inn, Super 8, Best Western Comfort Inn and Quality Inn hotels that have average rates well below $115 per night. These lower market segment hotels are a much larger5 segment of the hotel industry than the upper upscale hotels like Hyatt Regency, Westin, Hilton and Marriott.

2. RevPAR growth of 8.3% was second largest growth ever behind 2005 when RevPAR grew at 8.6%. RevPar is the hotel industry’s primary data point for profitability based on average room rates and occupancy.

As a consumer, my interest is more on the ADR, average daily rate. As long as the hotel has a room available for my stay, the occupancy does not matter much in my travels. That being said, ADR saw the largest increase in seven years at 4.6% in 2014. From April to December 2014, the ADR across the USA exceeded 2013 numbers every month.

Bottom line – Hotels, on average, are more expensive. $115 average room rate is about 15% higher than five years ago when rates hovered around $100 after dropping steeply during the 2009 economic recession.

3. Only 5.8% of hotels in 630 submarkets tracked in the USA had occupancy and ADR declines in 2014. The Top 25 markets had an average 72% occupancy compared to 60% for all other markets.

ADR room rates averaged $141 in top 25 markets compared to $100 in all other markets.

4. Data shows transient and group segments still growing for hotel bookings. Not of interest to me as a consumer who travels on discretionary spending.

5. Forecast for 2015 is continued growth in occupancy, which places pricing power in favor of hotels. Expect another 5% increase in room rates in 2015 and again in 2016 as demand grows faster than supply.

Are there hotel deals to be found in 2015?

All that being said, there are plenty of hotel deals to be found. There are hotel markets like San Francisco, Miami, New York and Boston where rates are sky high. Deals are still around if you can find them.

I picked up 3 hotel nights at the Boston Copley Place Marriott and Marriott Anaheim for $207 in an auction in December. That is $69 per night and includes breakfast for the hotel stays.

Loyalty Traveler – Bid for 64 Marriott deals in Omaha Children’s Miracle Network Fundraiser (Dec 15, 2014)

My strategy for high rates is to sleep around. If you are committed to a specific brand, like Starwood Hotels, then you are limited to the deals you can find. Sometimes there will not be any deals.

I saw this last week in Park City, Utah when rates at Hyatt, Waldorf-Astoria and St. Regis were $500 to $1,500 per night, while rates at condos outside the big brands were available for $250 per night in the same vicinity of the big brand hotels.

Last week I stayed at a Radisson, a Hyatt and a Sheraton to take advantage of the best rates and hotels I could reasonably afford for travel in Salt Lake City and Park City during the Sundance Film Festival.

The hotel industry likes its numbers from 2014 and they are partying like it is 2005. And like 2005 when my average room rate paid was about $100 per night, in 2014 I still managed an average paid room rate around $100 per night while earning bonus points and elite status. I still spend the majority of my hotel nights in upper upscale hotel brands.

My strategy is the same as a decade ago. Pay for rooms when rates are low and earn bonus points with the best promotions. I earned 50,000 Club Carlson points in the past two weeks on $350 in hotel spend. Those points will buy two hotel nights in Europe in places with hotel rates over $300 per night.

Redeem hotel loyalty points when rates are high is the other major part of my hotel stay strategy. I redeemed 35,000 Hyatt Gold Passport points in the past month to save on hotel room nights when rates were over $400 per night.

Earn and burn is still the affordable way to stay as a Loyalty Traveler. Plan trips in places where the earning is good to be prepared for your travels in places where the burning of loyalty points is good for sustainable hotel travel on a budget.

Conrad Miami

Rates at Conrad Miami dropped to $110 during the Christmas holiday week in 2012 when I stayed in the hotel, a small fraction of the hotel’s average daily rate for the year. Next weekend rates for February 6, 2015 start at $349.

About Ric Garrido

Ric Garrido of Monterey, California started Loyalty Traveler in 2006 for traveler education on hotel and air travel, primarily using frequent flyer and frequent guest loyalty programs for bargain travel. Loyalty Traveler joined BoardingArea.com in 2008.

More articles by Ric Garrido »

Comments

  1. The high rates for hotels are hard on people looking for their first job or a better job. When I got out of college, had no money, and was looking for my first permanent job, I would take red-eye Greyhound trips from San Francisco to Los Angeles or San Diego, arrive at around 8:00 a.m., freshen up in the bathroom upon arrival, interview in late morning or early afternoon, and then take a bus home in the late afternoon.

    Once I had a job and traveled for promotional interviews (about 10 years ago), I would book a room at a Holiday Inn, Crowne Plaza, or Hilton for the night prior to the interview.

    In my most recent round of job searching, I have been again booking rooms, but now am debating a night at the Good Night Inn versus a Motel 6. The most important thing to me is being near the interview site, rather than finding a luxurious place, but cost is a strong consideration as well. I find that many moderate range hotels are completely sold out during the middle of the week, leaving high end hotels that charge $200 or more for the night or very low end properties in questionable neighborhoods.

  2. @Sara J – The hotel industry is partying like 2005, yet many of us missed out on the economic recovery. My wife’s $10,000 in raises since 2008 have gone to pay the increased health insurance premiums that have risen from no copay to about $7,000 per year for insurance.

    I frequently recall a comment made to me back during the height of the financial recession when a hotel industry CEO said to me,

    “$400 for a hotel room is expensive discretionary spending. You can buy a new computer for that money.”

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