Getting Ready for 2019

By Timothy R. Wiersma, Vice President of Revenue Management, Red Roof Inns, and a member of HSMAI’s Revenue Management Advisory Board

Q42018 means it’s time to think about Q1 2019 and beyond. What does next year have in store for hospitality revenue-optimization professionals? During a recent call for HSMAI’s Revenue Management Advisory Board (RMAB), I led a discussion about macro trends, budgeting, and other issues RMAB member are tracking for 2019. Here are five takeaways:

1. The STR forecast. We kicked things off with an overview of recent data from STR, including the research company’s forecast for 2019: 1.9 percent growth in supply (compared to 2 percent forecast for 2018), 2.1 percent growth in demand (2.6 percent for 2018), 0.2 percent growth in occupancy (0.6 percent for 2018), 2.4 percent growth in ADR (2.6 percent in 2018), and 2.6 percent growth in RevPAR (3.2 percent in 2018).

 2. Slowing growth. RMAB members echoed STR’s forecast for slower growth in 2019 — especially compared to a strong 2018. “There’s a lot of uncertainty out there when it comes to group business, which was very good this year but looks a little more unsteady next year,” one member said. “I think about ’18, I didn’t have any anxiety at all. But I have a lot of anxiety about ’19.”

3. Potential challenges. “My biggest concern is around all of the various headwinds and risks out there,” an RMAB member said. “Discretionary spending is at a high. If that were to stop, what impact would that have on travel? Plus, the political landscape and things like that.” According to another member, it’s all about the labor market: “We’re definitely feeling the impact from labor costs, especially in certain markets. They’re forcing us to take a closer look at our ancillary revenue streams and ensuring that we’re optimizing all those as opposed to just traditional rooms revenue.”

4. Unplanned events. “The biggest factor that’s a wild card is environmental issue that seem to be occurring at a greater level of frequency,” a member said, “whether it’s volcanoes, hurricanes, etc.” Added another member: “The impacts that weather had on RevPAR results in Florida and Texas [in 2017] dramatically impacted the total U.S. performance. Look very closely and make updates as needed based on the results of those unplanned events that are happening now through the end of the year. That will tell the rest of the story.”

5. Downturn in 2020. “When you look at the macroeconomic data on business confidence, unemployment, capital investment — it actually looks really good for the next six to 12 months,” an RMAB member said. “Something will happen, but I think it’s more likely in the beginning of 2020 as opposed to 2019.”

Other members noted that the current cycle we are in has been exceptional and will not last for many more years. There seemed to be agreement on the idea that 2020 or soon after would see a downturn, but maybe not as dramatic as the last several downturns.

Categories: Revenue Management, Forecast
Insight Type: Articles