Market Report U.S.

U.S. Hotel Industry House Profit Reaches All-time High in 2014

Hotel industry revenue levels topped an estimated US$176 billion in 2014, which is nearly US$14 billion more than 2013, according to STR Analytics’ 2015 Hotel Operating Statistics (HOST) Almanac. Total industry-wide house profit reached nearly US$66 billion, an increase of 12.8 percent when compared to 2013.

STR Analytics Hotel industry revenue levels topped an estimated US$176 billion in 2014, which is nearly US$14 billion more than 2013, according to STR Analytics’ 2015 Hotel Operating Statistics (HOST) Almanac. Total industry-wide house profit reached nearly US$66 billion, an increase of 12.8 percent when compared to 2013. On an absolute nominal basis, this house profit represents an all-time high, though the percent of total revenue is still below profit levels recorded in the late 1990s, 2006 and 2007. 

The following chart details U.S. hotel industry profitability from 1990 to 2014. Please note this data extrapolates only on scale with the total amount of properties reporting room revenue to STR and uses all properties that reported profitability data, not just same-store properties. Also, house profit is defined as profit before deductions for fixed charges and management fees.

Graph - U.S. Hotel Profitability 1990-2014

Source: STR Analytics

"What's interesting was not just the increases in revenue, but the surge in operating expenses in 2014," said Joseph Rael, senior project manager at STR Analytics and overseer of the HOST program. "On a per-available-room (PAR) basis, we're seeing administrative and general, marketing, maintenance and utilities at growth rates much higher than what we experienced last year. We're also seeing total management fees growing faster than total revenue, which indicates incentive fees are finally kicking in."

Graph - U.S. Hotel Expenses and House Profit 1991-2014

Source: STR Analytics 

Industry-wide, the growth in operating expenses outpaced departmental expenses, similar to what occurred in 2006 and 2007. On a PAR basis, house profit soared 13.1 percent, the greatest rate of change since 2005, when house profit increased 14.9 percent. 

Same-Store Analysis

STR Analytics also analyzed same-store rates of change for approximately 5,000 hotels that participated in the HOST program in 2013 and 2014. In this analysis, full-service hotels grew house profit 11.3 percent, while limited-service hotels grew profit 7.2 percent. Luxury hotels showed the greatest profit increase (+11.7 percent), while the combined Midscale/Economy segment of hotels recorded the smallest increase (+4.5 percent).

Graph - Select Line Items % Change 2014 vs 2013

Source: STR Analytics; Same-store analysis based on over 5,000 hotels reporting data in 2013 and 2014

In real (inflation-adjusted) terms, total revenues for the industry on a PAR basis fell short of the levels realized not only in the previous peak of 2007 but also of six other time periods since 1990. Similarly, the house profit realized in 2014 was bested six other times in the past quarter-decade, with the peak of US$15,228 per-available-room occurring in 2000. However, the 2014 house profit was higher than the long-term average for the first time since 2008.

Graph - Inflation Adjusted U.S. Hotel Revenue and Profitability 1990- 2014

Source: STR Analytics

Custom HOST orders with 2014 data are now available for order, and the HOST Almanac will be available for purchase in early May. Please contact Host@STRAnalytics.com for ordering or information on the program.

 

About STR Analytics 

STR Analytics offers the unique combination of experienced lodging industry experts augmented by the unparalleled international database compiled by STR. STR Analytics’ unique resources enables the company to offer products and services to hotel owners, operators, brands, independents, lenders, investors, servicers, regulators and consultants that provide complete information regarding a particular property, portfolio, market or transaction.  STR Analytics, located in Broomfield, Colorado, is a division of STR and is associated with HotelNewsNow.com and STR Global. For more information, visit www.STRAnalytics.com.



Logos, product and company names mentioned are the property of their respective owners.