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PPENDIX A–Background

The Hotel Industry In The United States

by Joel N. Morse, Ph.D.

INTRODUCTION

The hotel industry of the United States has experienced slowdowns in the year 2009 because

of the recent economic slump. But slowly the industry is now recovering from the losses

incurred earlier. The outlook for growth of the hotel industry in the United States is expected

to be positive at the end of the year 2010 or by the middle of 2011. The performance of the

three key factors that represent the growth of the United States’ hotel sectors are discussed

below with respect to the year 2010. Several other topics related to the growth and failures of

the hotel industry of the United States are discussed, as well as metrics that are used in this

industry.

CURRENT SCENARIO

Due to the economic situation that began in 2008, certain hotels in some of the most

expensive cities of the United States dropped the prices of their hotel rooms to revive

occupancy rates. Marriott and Hilton are two such major chains of hotels which reduced

room tariffs in order to overcome their losses.

PERFORMANCE OF THE HOTEL INDUSTRY DURING JUNE 2010

During June, 2010, the hotel industry in the United States experienced some increase in the

performance of several measures of hotel occupancy and profitability. In year-on-year

measurements of the hotel industry reported that there was an increase of 1% in the average

daily rate (ADR) at the end of the month, leading to US$98.33. The occupancy rate (OR)

also increased, to 65%. 1

Occupancy for June, 2010

During June, 2010, some of the highest ranked markets of the United States economy marked

an increase in their occupancy rates. The lead was taken by Oahu Island, Hawaii with an

increase from 61.3% to 78.8%. It was then followed by Minneapolis-St. Paul, Minnesota-

Wisconsin and Denver, Colorado from 55.2% to 71.6% and 61.3% to 76.6% respectively.2

1 STR Reports US Hotel Industry Performance for June 2010. Retrieved August 5, 2010, from Asia Travel Tips:

http://www.asiatraveltips.com/news10/227-USHotelIndustry.shtml

2 STR Reports US Hotel Industry Performance for June 2010. Retrieved August 5, 2010, from Asia Travel Tips:

http://www.asiatraveltips.com/news10/227-USHotelIndustry.shtml

0

10

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50

60

70

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90

Pre-June Period

During June Period

But overall, the hotel industry in the United States showed mixed results. San Francisco,

California reported the an increase in three key metrics of performance. For example, the

occupancy rate increased to 78% from 65.9%. Miami – Hialeah, Florida also showed positive

results. Its occupancy rates jumped to 63.3% from 53%, and Nashville, Tennessee increased

from 46.2% to 57.3%. However, certain markets of hotel industry in the United States

showed a decrease in their occupancy rates. The market with the highest decrease in the

occupancy was Louisiana in New Orleans which fell from 63% to 53.3%. Similarly,

Washington, DC reported a decrease of 75.2% to 66.3%. This was followed by Dallas, Texas

where there was a decrease from 58.8% to 50.1%. 3

FORECAST OF US HOTEL INDUSTRY

3 STR Reports US Hotel Performance for the Week Ending June 5 – 2010. Retrieved August 5, 2010, from Hotel

News Resource: http://www.hotelnewsresource.com/article46476.html

Industry sources acknowledge that the U.S. hotel industry will exhibit improved performance

in several key metrics by 2010-2011. It has been predicted that the room occupancy rate will

increase to 55.8%. In the United States, the demand for rooms is expected to increase by

about 4.1% and the supply to service this demand is expected only to grow by 2.2%, which

means that there will be a situation of excess demand at the margin. According to industry

experts , the recovery of the hotel industry will be turning positive during the second or the

third quarter of this year. The industry will also experience an increase in three basic

performance measures during the year 2011. 4 The statistics of occupancy, revenue per

available room and average daily rate are metrics or performance measures of interest. 5

US HOTEL OCCUPANCY RATES

The United States’ hotel industry should experience any upturn positive signs before the

commencement of the year 2011, governmental stimulus measures and “animal spirits”

ameliorate the recession that hit the world wide economy during 2008. 6

4 Stronger US Hotel Industry Forecast for 2010, 2011 (2010, April 8). Retrieved August 5, 2010, from Hotel

News Resource: http://www.hotelnewsresource.com/article44978.html

5 Urie, R.S. (2010, January 27). STR: US hotel industry ends ’09 with double-digit RevPAR drop. Retrieved

August 5, 2010, from Bright Hub:

http://www.hotelnewsnow.com/Articles.aspx?ArticleId=2573&ArticleType=0

6 Slow recovery seen for U.S. hotel industry (2010, January 27). Retrieved August 5, 2010, from Reuters:

http://www.reuters.com/article/idUSTRE60Q4G920100127

During the period when the supply of the rooms was being handled, the occupancy rates of

the hotels in the United States had fallen marginally as compared with the previous records.

However, it has been forecasted that during this year the occupancy rates are going to

increase to 55.4% as compared with the last year’s occupancy rate, which was 55.1%. But

this statistic which has been forecasted for this current year is somewhat below the 20 year

average which is approximately 62.8%. Hoteliers in the United States state that pricing

power will return once they see a high rate of occupancy prevailing in the industry, which

should emerge in three to four years. 7

CONCLUSION

To conclude, the United States hotel industry is currently reacting to the economic crisis of

2008. But with time, the industry will be growing in most major aspects.

REFERENCES

Sharkey, J. (2010, July 5). Credit Card Hackers Visit Hotels All Too Often. Retrieved August

5, 2010, from New York Times:

7 Slow recovery seen for U.S. hotel industry (2010, January 27). Retrieved August 5, 2010, from Reuters:

http://www.reuters.com/article/idUSTRE60Q4G920100127

Slow recovery seen for U.S. hotel industry (2010, January 27). Retrieved August 5, 2010,

from Reuters: http://www.reuters.com/article/idUSTRE60Q4G920100127

STR Reports US Hotel Industry Performance for June 2010. Retrieved August 5, 2010, from

Asia Travel Tips: http://www.asiatraveltips.com/news10/227-USHotelIndustry.shtml

STR Reports US Hotel Performance for the Week Ending June 5 – 2010 (2010, June 11).

Retrieved August 5, 2010, from Hotel News Resource:

http://www.hotelnewsresource.com/article46476.html

Stronger US Hotel Industry Forecast for 2010, 2011 (2010, April 8). Retrieved August 5,

2010, from Hotel News Resource: http://www.hotelnewsresource.com/article44978.html

Urie, R.S. (2010, January 27). STR: US hotel industry ends ’09 with double-digit RevPAR

drop. Retrieved August 5, 2010, from Bright Hub:

http://www.hotelnewsnow.com/Articles.aspx?ArticleId=2573&ArticleType=0

US hospitality industry in doldrums (2010, May 17). Retrieved August 5, 2010, from Press

TV: http://www.presstv.ir/detail.aspx?id=126742&sectionid=3510203