Hotel Revenues Fall 6 Percent in July - As Monthly Room Prices Fell For The First Time In Years And Demand From Business Travelers Flagged
LOS ANGELES (Reuters) - U.S. hotel revenues dropped 6 percent in July, as monthly room prices fell for the first time in years and demand from business travelers flagged, according to figures released on Wednesday.
The 6 percent year-on-year drop in revenues per available room or revpar, the industry standard, was greater than the 3 percent to 5 percent dip forecast earlier this month by industry tracking firm Smith Travel Research.
It marked the fourth consecutive quarter of revpar decline this year, and indicated that the market -- which posted declines of 2.6 percent in April, 4.4 percent in May and 4.1 percent in June -- may yet have to hit bottom.
The July dip was the result of a 5 percent drop in average occupancy rate to 68.5 percent. But room prices, which had continued to rise all year despite declining occupancy rates, also fell for the first time in July by 1.1 percent.
The drop in room prices darkened the outlook for hotels somewhat because strong competition within the industry makes room rates hard to raise once they have been cut.
Several individual markets posted double-digit dips in revpar in July. The losses were highest in some of the biggest markets where growth was previously among the nation's strongest.
Among those, San Francisco's average occupancy rate fell 17.1 percent, while room prices went down 6.1 percent. The revpar, whose calculation is not a simple addition of those two figures, dropped a hefty 22.2 percent.
Other markets posting double-digit revpar declines included Boston (down 19.8 percent), Chicago (down 16.1 percent), New York (down 15.2 percent) and Atlanta (down 15 percent).
Among market segments, the highest-end hotels continued to take the biggest drubbing as business travelers on tightened budgets traded down to cheaper accommodations. Revpar for luxury hotels dropped 9.3 percent, the biggest drop for any sector.
At the other end of the spectrum, budget hotels, which have managed to post revpar gains when all other segments saw losses, eked out a 1.9 percent increase in July.
Bear Stearns analyst Jason Ader said the overall July numbers boded poorly for the hotel industry in the third quarter.
"July data kicks off what by all accounts is expected to be a very weak quarter," he wrote in a research note. "While July may be the trough (August is tracking a little better so far), we don't see much upside anytime soon."
Revpar represents the money generated, on average, by each of the rooms in a sample of hotels over a given period. The nation's largest hotel operators are Marriott International Inc.