Robust Hotel Industry Performance Amid Economic Uncertainties

2. A Robust Industry Regroups Among Economic Uncertainties • According to Cushman & Wakefield, all major hotel metrics for 2018 increased: room nights, 1.90 billion, +1.8%; occupancy rate, 66.2%, +1.4%; ADR (average daily rate), $129.70, +2.4%; and RevPAR (revenue per available room), $85.88, +2.8%. • These results were more than the initial 2018 forecasts and were attributed to less of an increase in room supply, greater demand and an increase in business travel; however, the 2.8% gain in RevPAR was less than the long-term average of 3.0%. • CBRE forecasts the 2019 US national occupancy rate to be the same as 2018, or 66.2%, and then decrease during 2020, to 65.7%, and 2021, to 64.6%, based primarily on the projected slowing of the US economy, with a recession very possible during this period.

3. Better Performance into Q3 2019 • Hoteliers expected April 2019’s RevPAR to be as bad as March’s, which only increased 0.6%; however, April surprised the industry with a RevPAR increase of 1.3%; room demand, +2.3%; and a slight increase in occupancy, or +0.3%. • The last three weeks of May all recorded increases in the major metrics compared to the same weeks during 2018, and the occupancy rate of 70.8% for the week ending 5/18 and 71.2% for the week ending 5/25 exceeded the rate for all of April, or 68.0%. • Although the occupancy rate for the week of 5/26–6/1 was 64.5%, it was still 0.6% better than the equivalent week of 2018. During the week, Tampa/St. Petersburg had the largest occupancy rate increase, or 15.6%.

4. Big Brands Increase Their Dominance • According to CBRE Hotels, 2018 was the 9th consecutive year of profit growth for US hotels, with total operating revenue +2.6% at the average hotel; however, operating expenses increased 2.8%, resulting in an increase in gross operating profits of 2.3%. • The major business trend of 2018 was the growth of the largest hotel chains: Wyndham Worldwide now has 21 brands with the acquisition of La Quinta Holdings; Choice Hotels acquired Wood Spring Suites; and Hilton and Best Western launched new brands. • All 6 categories of boutique hotel brands are forecast to increase 2019 RevPAR, with luxury first, at +3.1%; legacy upper-priced, +1.6%; upper-upscale, +1.5%; referral groups and independents, +1.4%; soft, +1.2%; and legacy lower-priced, +0.3%.

5. Hotels Are a Different Business at National Parks • Annual recreation visits to US National Parks increased from 77.5 million for 2015 to 84.6 million for 2018. Visits to Joshua Tree increased 111% from 2008 to 2018, or 2.94 million, but the Great Smoky Mountains had the most 2018 visits, or 11.42 million. • Unsurprisingly, the largest months for hotel demand at National Parks are June, July and August, with July 2018 totaling approximately 2.7 million; June, 2.45 million; and August, 2.35 million; and weekends, 75.5%, compared to weekdays, 59.6%. • Approximately three-quarters (72.4%) of National Parks hotel supply is in the three lower-tier classes, or economy, 33%; midscale, 17%; and upper midscale, 23%. 57.6% of National Parks hotels are independent, compared to 28.5% of the rest of the US.

6. Consumers’ Online Booking Research Insights • Ignition One, a customer intelligence platform, tracked 4.7 million global hotel bookings during Q4 2018. Consumers spent more average time researching economy hotels online prior to booking, or 40.5 minutes, compared to 22.0 minutes for luxury hotels. • Ignition One attributed the difference to the probability of more choices for low-end hotel travelers and greater brand loyalty among consumer researching luxury hotels. • The average cart abandonment rate for the 5 hotel tiers measured was 67.6%, with extended stay the most, or an average of 74.1 for the three months of Q4, and the lowest average among midscale hotels, or 63.7%.

7. More Ways to Stay, But Hotels Remain Unchallenged • Glamping, or luxury camping, is attracting more upscale campers and its CAGR (annual compound growth rate) of 14% has influenced AutoCamp’s plans for a nationwide network of specially manufactured Airstream camper trailers with luxury amenities. • Major hotel chains are cognizant of the trend, as Accor Hotels is launching its Flying Nest brand of re-purposed shipping containers as modular structures, and often for temporary use at music festivals, conferences and sporting events. • Although Airbnb and similar home-sharing companies have a global reach, they still account for a small percentage of the traditional US accommodation sector.

8. Advertising Strategies • Local hoteliers may be able to differentiate their brands by partnering with glamping and other alternative hospitality options, and then aggressively market themselves as a total, 21st century hospitality entity. • Invite local hoteliers to support station-based community events by offering a free, extended weekend package as a prize from a drawing for those in the community who participate in your station-sponsored events. • With more multi-generational families in the US, local hoteliers can market themselves to these niche audiences during Cinco de Mayo and similar heritage celebrations, which are signature events in the community.

9. New Media Strategies • For independent hoteliers to compete with the major brands, they must continue to add technological amenities not only to attract younger adults, but also business travelers who value time-saving services. • Local, independent hoteliers may find it advantageous to place ads on your station’s Website and use their social media pages to promote special events and local celebrations and offer a special package to those in town to attend these events/celebrations. • Feedback in the form of customer reviews is valuable for hotels and resorts, but a quarterly survey of specific questions is likely to generate important data and reveal positive and negative consumer/customer perspectives to help evolve amenities and services.