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Hotel Performance Remains Strong In Q2 Despite Incoming Supply

The U.S. hotel market has fared well the first half of the year, recording two consecutive quarters of strong fundamentals. 


A recent study by STR shows in Q2 2017, the occupancy rate at hotels nationwide was up 0.5% to 69.5% compared to the same time last year.

"If you think about where we are in the cycle, occupancies are really high," STR Senior Vice President of Operations Bobby Bowers said.

The sector is almost within its seventh year of RevPAR growth, according to Bowers, which is also expected to continue into 2018. In the study's top 25 markets, Orlando, Florida, RevPAR jumped 13.5% to $98.21 during the quarter — the only market to see double-digit growth.

The Seattle market was another that experienced high RevPAR increases, jumping 9.6% to $137.72. Houston had the biggest decline in all three performance metrics used in the study. Occupancy was down 4.9% to 62.9%. Average daily rate was down 6.4% to $103.49. RevPAR fell 11% to $65.09.

That is not to say that heavy supply levels are not having an impact

STR Senior Vice President of Operations Bobby Bowers

There were 4,843 hotels in the pipeline as of April, totaling 580,427 rooms under contract (this includes projects under construction, in the planning stages and projects that are still unconfirmed), STR reports. 

"We're seeing a pretty steady increase in new supply growth, and when you see that, that tends to kind of hold occupancy down," Bowers said. "The more rooms you have to fill, the more people you have got to fill those rooms." 

Airbnb has also made headwinds in the industry, forcing hoteliers to step up their game. Hotels are finding new, innovative ways to win customer loyalty, such as providing new customer-service offerings, increasing the use of tech and placing an emphasis on helping tourists have more of a local experience. STR’s research sample included nearly 58,000 hotels and 7.8 million hotel rooms worldwide.

However, nationwide things are looking good. ADR increased by 2.2% to $127.43, according to the report.

Hotel performance nationwide was strong in Q1 year-over-year with positive occupancy gains and a jump in RevPAR, STR noted earlier this year. In fact, Bowers said Q1 was the hotel sector’s strongest first quarter thanks to strong growth levels and a favorable beginning of the year that included events that drove demand, such as Easter, the presidential inauguration and the 2017 Women’s March.

"This is two consecutive quarters in the U.S. where room supply growth has been 1.8%," Bowers said. "That's the highest supply growth we've had in a long time. We think that's going to continue to increase."