HOTELMARKETING.COM

2005, best year ever for US hotel industry

May 29, 2006 |

The US Hotel Industry is firing on all cylinders. Nationwide average daily rate (ADR) and occupancy figures increased 5.4% and 2.9%, respectively, in 2005 and the accelerated growth in ADR helped hoteliers to increase their profits.

The year 2005 marked the most profitable year ever (in absolute dollars) for the US Hotel Industry. Based on statistics compiled by Smith Travel Research (STR), the industry generated some $122.7 billion in revenues and $22.6 billion in profits last year. This profit number is slightly above the $22.5 billion that the industry generated in the year 2000, the highest level achieved prior to 2005.

Commented Randy Smith, founder and CEO of STR: “The US Hotel Industry is firing on all cylinders. Nationwide average daily rate (ADR) and occupancy figures increased 5.4% and 2.9%, respectively, in 2005 and the accelerated growth in ADR helped hoteliers to increase their profits. After the tragic events of 9/11, we can say with confidence that the industry has rebounded and for the next two years we expect further excellent results.”

Mark Lomanno, president of STR, added: “These strong results could have been even better had it not been for increases in expenses such as energy, labor and insurance. In fact, profits as a percentage of revenue in 2005 was 18.4%, well below the 20.1% profit margin we reported in 2000. But, on a continuing positive note, room demand remained strong and 2005 marks the first year that the hotel industry sold over one billion room nights.

The sustained increase in demand, especially from group and transient business travelers, coupled with the limited number of newly built rooms should translate into even higher occupancies and room rates for existing hotels. We estimate that the industry will open about 75,000 new rooms in 2006, roughly a 1.2% supply addition. This increase in new rooms is still well below the long term historical average of 2.1%. With room demand expected to increase some 3.1%, existing hotels will benefit and should be able to raise both their occupancies and rates. The hotel industry should indeed be: ‘Great through ’08!’

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