Economy Watch: Hotel Revenues Edge Down, Expenses Edge Up

The hotel industry's real expense growth was the greatest annual change in the past 20 years, according to CBRE Hotels' Americas Research.
R. Mark Woodworth, Senior Managing Director, CBRE Hotels’ Americas Research

U.S. hotel revenue growth is slowing down, while expenses are on the rise, according to CBRE Hotels’ Americas Research‘s Trends in the Hotel Industry report for 2016, which was released this week. After five years of strong increases in occupancy, average daily rate (ADR) and profits, U.S. hotels reached the top of the current business cycle in 2015, noted R. Mark Woodworth, senior managing director of CBRE Hotels’ Americas Research.

“It isn’t a surprise that total operating revenues grew just 5.3 percent from 2014 to 2015,” Woodworth said. “What stands out as a concern for hotel owners and operators was the increase in expenses, especially during a year when inflation was just 0.1 percent.”

From 2014 to 2015, 56.9 percent of the hotels in the Trends sample posted an increase in occupancy, down from the 70+ percent marks posted the prior few years. Some 86.1 percent of the properties in the sample were able to raise their room rates during the year, however, while 80.5 percent of the hotels enjoyed an increase in revenue per available room (RevPAR). On average, the Trends sample achieved a RevPAR gain of 4.6 percent.

At the same time, hotel expenses increased by 4.7 percent during the year, or 4.6 percent in real terms. The 4.6 percent increase in real expense growth was the greatest annual change in the past 20 years, according to CBRE. Two categories that contributed to the extraordinary rise in operating expenses: labor and fees.

Trends is the firm’s annual survey of operating statements from thousands of hotels across the nation. The data for the 2016 survey was processed in accordance with the new 11th edition of the Uniform System of Accounts for the Lodging Industry.