ShareWhile many are happy to see 2016 in the rearview mirror, what’s ahead for hotel performance in 2017 is still unclear. On the last earnings calls of ’16, many of the major public companies adjusted their year-end performance expectations down from their last projections. And those that have shared outlooks for 2017 have reported flat to modest RevPAR growth.
Curiosity about this trend drove a recent discussion for HSMAI’s Revenue Management Advisory Board. Is this growing trend of lowered performance expectations real? Is a downtown looming? Or is it just a normal cycle of skepticism? For most, the glass is half full on this issue:
The Glass is Half Full
- There’s usually a tendency to start the year with a bright outlook, then step it back from what was originally anticipated. I don’t think these latest projections are any worse than normal.
- Historically, Q4 expectations consistently drop for each year. This seems like a pretty standard trend…except when we’re in a downturn and things started out pessimistically.
- It isn’t that bad that a few companies revised downward a percentage point or two.
- This isn’t a sign of the apocalypse; we are just looking around for one. Sometimes we torture the data until it tells us a sad story. Demand is softening, but softening is different from the end of the world. Considering that the pace at which we’ve been going for the last few years has been unprecedented, it is not realistic to think we can continue at that pace.
- This is a good example of herd mentality. When the first company revises downward, others do it as well, just so it doesn’t look so bad if they miss the mark.
- When you look at the major pundits (STR, PWC, and CBRE), they all agree that supply will exceed demand growth in ‘17, and that occupancy will decline in ‘17 over ‘16. At the same time, everyone is still saying RevPAR will grow and be pretty healthy. While slowing, this still speaks to positive growth! We have to be careful not to make a self-fulfilling prophecy wherein we’re talking doom and gloom, which affects behaviors, and then shapes actual results.
- Since the election we have seen an uptick in group bookings, and it feels like things are more stable. The sentiment was that if Trump was elected there would be absolute chaos – but the initial shock has been somewhat tempered by the recent climb of the DJIA. We’ll know more about the potential impacts of the new administration after the inauguration on January 20.
- You have to break large companies’ projections down in order to make them meaningful. For instance, look at the byregion and your actual markets. California is seeing very strong growth and outpacing most companies’ overall projections. Another way to look at them is by segment – luxury versus mid-scale will look different.
- If your hotel or company is looking at these other companies’ reports and making decisions based on them, it is to your folly! Know YOUR markets, YOUR segments, and YOUR customers. Set your budgets, strategies, and projections against them for the best results. When you consider the nine hotel companies that HotelNewsNow covered in “Infographic: RevPAR expectations declined in 2016”, and compare their outlooks for Q3 2016 and a year ago, there is the same pessimism about current results and the future.
- Texas is one of the biggest feeder markets in the US, and dropping oil prices caused significant drops in demand for the country. Now that oil prices are on the rebound, we should see a rebound in demand for this market as well.
The Glass is Half Empty
- Don’t forget that we’re at record-setting highs, which means that growth cannot continue to be where it’s been. For 2017, there are two key issues that are going to play into your performance in a new way: first, supply is starting to creep up; and, the global economy (depending on where your assets are located, exchange rates, etc.) is something to watch closely.
- Things are softening a little, but I don’t think it’s as bad as the Chicken Littles make it seem. Group pace is remaining relatively healthy as we look to the future. Occupancy is up YOY. However, booking pace is decelerating a little and corporate travel is lagging. Hotels missing that base business could be compounding the negative sentiments.
About HSMAI’s Revenue Management Advisory Board
HSMAI’s Revenue Management Advisory Board is advancing the revenue management discipline by providing leading education, a best practices exchange, thought leadership, and networking for revenue management professionals, other sales and marketing professionals, and senior management in the hospitality industry. 2017 members include:
- CHAIR: Linda Gulrajani, CRME, Vice President, Revenue Strategy & Distribution, Marcus Hotels & Resorts
- Chris K. Anderson, Professor, Cornell University
- Veronica Andrews, CRME, Director of Active Data, STR
- Ravneet Bhandari, CEO, LodgIQ
- Christian Boerger, CRME, CHDM, Corporate Director of Revenue Strategy, Pacific Hospitality Group
- Denise Broussard, SVP, Revenue Management & eCommerce, Interstate Hotels & Resorts
- Rosemary Browning, President, Global Career Horizons
- Tom Buoy, CRME, EVP Pricing and Revenue Optimization, Extended Stay America
- Brian Burton, CHSE,CRME, Vice President Revenue Strategy & Optimization, White Lodging
- Janelle Cornett, Regional Director, Revenue Management, TPG Hotels and Resorts
- Kathleen Cullen, CRME, Senior Vice President Revenue & Distribution, Two Roads Hospitality
- Tammy Farley, President, Rainmaker
- Neal Fegan, CRME
- Monte Gardiner, Sr. Director, Revenue Management Services, Best Western Hotels & Resorts
- Renee Haddad, CRME, Director, Revenue Account Management, Preferred Hotels & Resorts
- Adam Hayashi, CRME, Vice President of Revenue Management, Accor Hotels
- Mohamed Khanat, CRME, Regional Director – Americas Account Management, IDeaS – A SAS COMPANY
- Kelly McGuire, VP Advanced Analytics, Global Analytics, Wyndham Destination Network
- Karen McWilliams, Vice President of Revenue Strategy, Concord Hospitality Enterprises
- Chris Nixon, CRME, AVP Revenue Optimization, Ashford Hospitality Trust
- Breffni Noone, Associate Professor, Pennsylvania State University
- Scott Pusillo, CRME, Vice President, Market Strategy, Viceroy Hotel Group
- Scott Roby, CRME, Vice President, Revenue Management, Evolution Hospitality
- Tim Schulte, CRME, Solution Consultant, Infor
- Jim A. Struna, CRME, Director of Revenue Management, Auberge Resorts
- Tim Wiersma, Vice President, Revenue Management, Red Roof Inns, Inc.
- Monica Xuereb, Chief Revenue Officer, Loews Hotels & Resorts
- Nicole Young, CRME