Despite a slight slowdown in the first three months of this year, the U.S. economy is still going strong. That’s also reflected in the hotel industry. According to Lodging Magazine, in the first quarter of 2019, the hotel industry experienced positive results in three critical performance metrics. Compared to the first quarter of 2018, the average daily rate — or ADR — increased by 1.1 percent to $129.02. Occupancy rose by 0.4 percent to 61.8 percent and RevPAR rose by 1.5 percent to $79.68. Interestingly, demand — which was up by 2.4 percent — outgrew supply, even though there were two percent more accommodations available. Contact InterServ for premier hotel design services and renovation solutions.
It’s interesting to note that the San Francisco/San Mateo market experienced the greatest increase in ADR with an increase of 15.9 percent to $270.23. This resulted in a corresponding lift in RevPAR to a total of $209.51.
High Operating Margins
As HospitalityNet points out, even though labor has become more scarce and expensive, hotel managers and owners have achieved the highest gross operating margins in more than five decades by controlling other operating costs.
A total of 39 sale transactions over the sum of $10 million took place, totaling approximately $2.7 billion. They comprised roughly 7,900 hotel rooms at an average sale price of $339,000 per room. In contrast, in Q1 2018, 55 transactions occurred totaling around $2.9 billion and encompassing 12,700 hotel rooms at on average $231,000 per room.
More than 40 percent of all sale transactions took place in just three states. Florida led the pack with nine sales, followed by New York with four trades and California with three sales. Moreover, seven of the hotel transactions in Q1 involved sums of between $100 million and $199 million each.
Threats to the Hotel Industry
Despite the flourishing economy, there are still significant threats to the hotel industry. This includes political uncertainty both nationally and abroad, international trade tensions and tariffs, the growing role of Airbnb and similar services, natural disasters, terrorism and the demand for transparent pricing that negatively impacts room rate growth. Additionally, labor scarcity, wage increases, and higher taxes all play a role.
All things considered, while the overall performance of the hotel industry was good during Q1 2019, the number of factors that are influencing or could potentially influence the sector indicate a tenuous industry outlook.
Hospitality Interior Services
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