TravelNewsAsia.com
Wed, 11 May 2016

U.S. Hotel Industry Profit Margin Surpasses 2007 Peak

Results of STRís 25th annual HOST Almanac indicate that U.S. hotel industry revenue topped an estimated US$189 billion in 2015, adding nearly US$14 billion in revenue from 2014.

 Total industry-wide house profit reached almost US$73 billion, a year-on-year increase of 9.4% on a per available room basis.

 On an absolute nominal basis, the house profit represents an all time high, and the house profit margin for 2015 exceeds the previous industry peak reached in 2007.

ďIndustry revenues and profits continue to reach record highs,Ē said Joseph Rael, STRís director of financial performance. ďAdditionally, we saw profit margin finally surpass the previous peak from 2007. Of course, at this point in the cycle, weíre seeing both revenue and profit growth starting to slow, and we expect growth to continue to taper over the next couple of years as well.Ē

Revenue and GOP growth levels were strong in 2015, but lower than the levels experienced in 2014. On a nominal basis, house profit increased 11.2%, compared to 12.9% in 2014.

Inflation-Adjusted Profits

Last year, the HOST Almanac presented an extensive analysis of inflation-adjusted profits for the industry.

 STR found that while profits on a nominal basis were at an all-time peak, inflation-adjusted profits were strong, but still below previous peaks. Also, 2014 profits were below the profit levels of six other years since 1990 (after adjusting for inflation).

In real terms, the industryís total revenue in 2015 surpassed the levels realized at the previous peak of 2007, but remained below the peak in 2000. Similarly, the house profit realized in 2015 was the second-best profit level since 1990, behind only the peak of US$15,248 per available room in 2000.

STR notes that labor costs were much lower in 2000. In comparing a same-store set of more than 1,100 hotels for 2000 and 2015, labor costs were up from 29.3% of total revenues in 2000 to 32.3% in 2015.

Same-Store Analysis

STR also analyzed same-store rates of change for approximately 5,000 hotels that participated in the HOST program in 2014 and 2015.

 In this analysis, full-service hotels grew house profit 7.3%, while limited-service hotels grew profit 6.4%. Upper Midscale hotels showed the greatest profit increases (8.4%), while the Luxury class segment recorded the smallest increase (6.0%).

Marketing and utilities led to the largest changes in 2015, with marketing increasing 8.6% and utilities decreasing 3.5%. Rooms expense, A&G and POM grew moderately (+2.4%), while management fee growth slightly surpassed total revenue growth at 5.3%. Total labor costs grew at a reasonable 4.2% in 2015, although salaries and wages increased 7.2% for those hotels that reported the breakdown of labor costs.

See other recent news regarding: STR, Pipeline, ADR, RevPAR, Spending

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