Hotel Industry Posts Record Room Revenue in 2008, Other Indicators Slide

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(News Source: Smith Travel Research)

(HENDERSONVILLE, TN) -- The U.S. hotel industry average daily rate reached a record high, ending 2008 at US$106.55, but Pre-Tax Income Profits for the year were down 7.9 percent to US$25.8 billion, according to STR's Hotel Operating Statistics (HOST) Study.

According to the HOST Study, the hotel industry generated US$140.6 billion in room revenue, a 0.9-percent increase from 2007. However, the ongoing economic slowdown affected the hotel industry considerably. The decrease in room revenue during the last four months of 2008 was US$1.7 billion when compared with the final four months of 2007. As a result, the total profit loss in the U.S. hotel industry in 2008 was US$2.0 billion, which illustrates that the room revenue loss post-Labor Day was essentially pure profit loss. The Gross Operational Profit (GOP) percent as a percentage of revenue was 38.2 percent of the total revenue.

"The hotel industry was hit hard by the decreases in leisure and business demand," said Mark Lomanno, president of STR. "Unfortunately we will be operating in an environment of declining demand and increasing room supply for a while, which will put additional pressures on room rates and profits. We just have to remember that this is a cyclical industry, and things are expected to get better towards the end of 2009. But, operators need to watch their cost structure and continue to maximize ADR where ever possible."

The study included results from more than 5,800 hotels, the most participants ever to contribute to the HOST Study.


Other highlights of the HOST Study:

• Full-service hotels reported an average occupancy rate of 67.4 percent and ADR of US$164.31 in 2008, compared with 2007 when occupancy was 70.0 percent and ADR was US$166.69.

• Full-service hotels' GOP in 2008 was 34.3 percent, compared with 34.4 percent in 2007. The GOP was equivalent to about US$21,972 per available room.

• The study showed the bigger the full-service hotel, the better the occupancy. Full-service hotels with more than 500 rooms reported an occupancy rate of 71.3 percent compared to hotels with under 150 rooms, which reported an occupancy rate of 63.5 percent.

• Among the limited-service hotels, the Middle Atlantic region had the highest occupancy rate (72.3 percent) and the highest ADR (US$147.50) among the geographic regions for the year.

• Limited-service hotels' GOP in 2008 was 51.2 percent (compared with 55.4 percent in 2007), which amounts to US$12,842 per available room.

• Limited-service hotels' Income from Fixed Charges (Gross Operating Profit after deducting franchise and management fees) was US$47.65 per occupied room night-up from US$84.15 in 2007. That represents US$11,406 per available room.

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