Hotels Report Strong RevPAR Gains

Aggressive rate increases begin to take hold

Major hotel companies have reported solid third-quarter results, particu­larly in reven­ue per available room. The InterContinental Hotels Group enjoyed a healthy 6.4 percent RevPAR growth, year-over-year; Marriott International saw a 6.9 percent increase; Hyatt Hotels reported a 9.2 percent rise, and Starwood Hotels & Resorts posted double-digit success -- with 11.6 percent worldwide RevPAR growth.

"We expect to continue growing faster than the market, both in terms of RevPAR and footprint," Starwood CEO Frits van Paasschen told investors.

The CEO attributed his company's "cautious confidence" to a few factors, particularly Starwood's focus on emerging markets and the almost total lack of supply growth in more developed destinations. "In developed markets, occupancies are now at 2007 levels and at a point where rates have historically risen," noted van Paasschen.

Meanwhile, Starwood's third-quarter RevPAR growth for the Asia Pacific region was 15.5 percent, and the numbers grew by 19.3 percent in Latin America. In both cases, average daily rate increases were significant: 9.7 percent in Asia Pacific and 15.4 percent in Latin America.

Even in more seasoned markets, rate hikes played a major role. In Europe, Starwood's ADR grew by a jaw-dropping 17.6 percent in the third quarter, driving a 20 percent year-over-year increase in RevPAR.

"Brands, management companies and owners are aggressively focused on rate," noted Bjorn Hanson, divisional dean and clinical professor at New York University's Hospitality, Tourism and Sports Management school. But recent gains have been a long time coming. "Rate increases have been lagging behind demand and occupancy during this cycle more than any since 1968," said Hanson.

As for group rates, Hanson expects them to lag because many already were contracted for 2012. "But they will accelerate rapidly once overall ADR increases become steadier," he predicted.