When old hotels age gracefully and purposefully, they are able to achieve “grande dame” status. These properties typically compete in the luxury or upper-upscale market segments and frequently outperform the contemporary competition when it comes to occupancy and average daily rate (ADR). In addition, the historic properties often have wonderful stories and folklores that attract both travelers and hotel investors.
When old hotels age gracefully and purposefully, they are able to achieve “grande dame” status. These properties typically compete in the luxury or upper-upscale market segments and frequently outperform the contemporary competition when it comes to occupancy and average daily rate (ADR). In addition, the historic properties often have wonderful stories and folklores that attract both travelers and hotel investors.
While owners and managers appreciate the sentiment and stature of these properties, historic hotels have unique operational challenges. As with any old structure, there are operating functions that require greater than average time and expense. On the other hand, the popularity of these properties has enabled them to recover faster from the depths of the Great Recession compared to their younger competitors.
To analyze the performance of historic hotels, PKF Hospitality Research (PKF-HR), a CBRE Company, examined the performance of luxury and upper-upscale hotels that opened prior to 1960. Comparisons were made to the performance of comparable luxury and upper-upscale properties built since 1960. Only hotels that provided data for PKF-HR’s Trends in the Hotel Industry survey each year from 2007 through 2014 (most current annual data available) were included in the study sample.
The study sample consisted of 30 historic hotels with an average age of 96.6 years and an average size of 427 rooms. The contemporary sample averaged 23.4 years in age and 363 rooms in size. Thirty-nine of the newer hotels were resorts, while another 201 were full- service properties.
Greater Revenues, Greater Expenses In 2014, the average historic resort property in the sample achieved a 3.2 percentage point occupancy premium over the average contemporary resort. On the other hand, the historic full-service hotels lagged the average occupancy level of their contemporary counterparts by 2.5 percentage points. In total, the average historic hotel achieved an occupancy level of 76.9 percent, slightly greater than the 76.7 percent aggregate average for the contemporary sample.
Despite the fact that both the historic and contemporary samples consisted of properties in the luxury and upper-upscale categories, we observed some significant differences in the ADRs achieved in 2014. During the year, the historic hotels averaged an ADR of $262.27, 17.7 percent more than the $222.84 ADR for the contemporary sample. Both the historic resort (24.9 percent) and full-service (8.1 percent) hotels achieved ADR premiums over their respective new property samples.
Given the aforementioned occupancy and ADR premiums, the historic hotel sample was able to achieve a 2014 revenue per available room (RevPAR) of $201.65, 18.1 percent greater than the $170.81 RevPAR earned by the contemporary properties. Given the greater contribution of food and beverage revenue at the historic hotels, the older sample was able to realize an even greater total RevPAR premium of 25 percent.
