The year 2017 has been productive for hotels in the United States. According to the latest Smith Travel Research (STR) report (September 2017), the year-to-date occupancy for these lodging firms increased 0.6% to 67.4%, relative to 66.9% for the same period in 2016; the year-to-date average daily rate, or ADR (September), grew 2.0% to $127.14. The year-to-date ADR was $124.18 for the same period in 2016, $120.45 in 2015, $114.77 in 2014, $110.35 in 2013, $106.10 in 2012, $101.70 in 2011 and $98.06 in 2010. The September year-to-date revenue per available room (RevPAR) of these firms also increased by 2.6% to $85.70, relative to $83.10 for the same period in 2016.
Per latest IBISWorld Industry Report for Hotels & Motels in the United States, the industry revenue has shown robust growth during the recent five-year period. The industry revenue for U.S. hotels and motels should increase to $185.2 billion in 2017 at an average annual rate of 4.7%, relative to $178.8 billion in 2016, $172.5 billion in 2015, $172.6 billion in 2014, $153.8 billion in 2013, $147.2 billion in 2012, $140.9 billion in 2011, and $134.1 billion in 2010. summarizes the rising trend of revenues in this industry during the past 17 years (since 2000).
Hotel industry investors have welcomed this positive trend. For a change, hotel industry stocks have outperformed the market, leading to significantly positive market premiums. summarizes the 2017 stock returns of key hotel industry firms from both lodging and hotel-motel REIT sectors.
The JHFM index for hotel industry stocks has shown significant market premiums this year, suggesting investor optimism in these stocks on an average. The JHFM index is a market-capitalization weighted index maintained by the Journal of Hospitality Financial Management. It is a two-part index measuring the performance of hotel stocks trading in the U.S. equity markets. The first part is the JHFM Lodging Index, which consists of the 10 largest market-cap firms in the lodging sector. The second part is the JHFM Hotel-Motel REITS Stock Index, which consists of the 10 largest Hotel-Motel REIT firms currently trading in U.S. equity markets.
As shown in , all three JHFM hotel stock indices have outperformed the market, with their significantly negative market premiums (25.25% for overall hotel industry stocks; 31.49% and 6.46% for lodging stocks and hotel-motel REIT stocks, respectively). The strong resilience in hotel industry stocks after their decelerating and pessimistic trend in 2016 suggests that the industry’s speculative fears from last year’s changing politico-economic climates in the United States and post-Brexit Europe are now settling down. Such optimism of hotel investors could also be attributed to this year’s relatively sound economic fundamentals and consequent spur in consumer spending.
References
- Alvarez, A. (2017). IBISWorld industry report 72111 October 2017: Hotels & motels in the US. Industry Research Reports. Retrieved November 3, 2017, from http://www.ibisworld.com/industry/home.aspx
- HNN Newswire. (2017). HNN–STR: US hotel performance for September 2017. Retrieved October 29, 2017, from http://www.hotelnewsnow.com/Articles/247325/STR-US-hotel-performance-for-September-2017
- Morningstar Investment Research Center Data. (2017). Retrieved November 3, 2017, from http://www.morningstar.com/