Hotel industry revenue rose dramatically in 2014: STR Global

Hotel industry revenue rose dramatically in 2014: STR Global

House profit represents an all-time high, though the percentage of total revenue is still below profit levels recorded in the late 1990s, 2006 and 2007, says STR

House profit represents an all-time high, though the percentage of total revenue is still below profit levels recorded in the late 1990s, 2006 and 2007, says STR

Hotel industry revenue levels topped an estimated US$176 billion in 2014, which is nearly US$14 billion more than 2013, according to STR Analytics’ 2015 Hotel Operating Statistics (HOST) Almanac. 

Hotel profits rose dramatically in 2014.
Hotel profits rose dramatically in 2014.

Total industry-wide house profit reached nearly US$66 billion, an increase of 12.8 percent when compared to 2013. On an absolute nominal basis, this house profit represents an all-time high, though the percentage of total revenue is still below profit levels recorded in the late 1990s, 2006 and 2007.

“What’s interesting was not just the increases in revenue, but the surge in operating expenses in 2014,” said Joseph Rael, senior project manager at STR Analytics and overseer of the HOST programme. “On a per-available-room (PAR) basis, we’re seeing administrative and general, marketing, maintenance and utilities at growth rates much higher than what we experienced last year. We’re also seeing total management fees growing faster than total revenue, which indicates incentive fees are finally kicking in.”

Industry-wide, the growth in operating expenses outpaced departmental expenses, similar to what occurred in 2006 and 2007. On a PAR basis, house profit soared 13.1 percent, the greatest rate of change since 2005, when house profit increased 14.9 percent.

STR Analytics also analysed same-store rates of change for approximately 5,000 hotels that participated in the HOST programme in 2013 and 2014. In this analysis, full-service hotels grew house profit 11.3 percent, while limited-service hotels grew profit 7.2 percent. Luxury hotels showed the greatest profit increase (+11.7 percent), while the combined Midscale/Economy segment of hotels recorded the smallest increase (+4.5 percent).

In real (inflation-adjusted) terms, total revenues for the industry on a PAR basis fell short of the levels realised not only in the previous peak of 2007 but also of six other time periods since 1990. Similarly, the house profit realised in 2014 was bested six other times in the past quarter-decade, with the peak of US$15,228 per-available-room occurring in 2000. However, the 2014 house profit was higher than the long-term average for the first time since 2008.

Gary Marshall
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