Growth in revenue per available room for hotels in the United States has contracted since 2015 after consistently exceeding the rate of inflation for the previous five-year period, according to a recent analysis from Moody’s Investors Service. That slowdown in growth, in addition to convergence with the inflation rate, indicates that the U.S. hotel industry is approaching its peak.
Overall U.S. RevPAR grew by more than 39 percent on a cumulative basis from 2010 to 2015, according to Moody’s new report, “Slowing RevPAR growth highlights disparities in U.S. hotel markets.” Inflation, meanwhile, rose 9 percent over the same period, as measured by the Consumer Price Index. Moody’s projects that year-end 2017 data will show U.S. RevPAR growth of 2.8 percent. By contrast, RevPAR grew 3.2 percent in 2016.
This level of RevPAR growth signals the end of an expansionary period for the U.S. hotel industry, the Moody’s analysis claims.
A Look at Markets
The analysis takes a deeper dive into specific U.S. markets and how they fared in RevPAR growth.
Oahu, Hawaii, has consistently outperformed the overall U.S. hotel industry in terms or RevPAR average over the past two decade, according to the report. Researchers credit this to a diverse demand base and new-supply constraints.
On the other end of the spectrum, Chicago continuously underperforms. The market has never surpassed the average growth for overall U.S. RevPAR, and researchers attribute that to competition for business travelers from markets on the coasts or for those in warmer climates.
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New York City has historically outperformed the U.S. average since 1998, the research shows. The exception to that, however, is the period immediately after the 9/11 attacks, from 2001 through 2004. Additionally, from 2015 to present, the market’s RevPAR growth has lagged due to an increase of new supply.
San Francisco struggled for much of the decade starting in 2001, but then it has surpassed the overall U.S. RevPAR average since 2013. The ups and downs of the technology sector have helped to account for the city’s RevPAR volatility, according to the report.
”Eight out of the top 25 U.S. markets are already experiencing negative RevPAR growth rates,” said E.J. Park, Moody’s VP, senior credit officer, via a news release. “The overall growth rate remains positive owing to strong performance in outperforming lodging markets. However, the above-average performance of these markets masks the deteriorating fundamentals of weaker ones.”