The U.S. lodging sector set a record for revenue per available room (RevPAR) of $78.671 in 2015 as a result of all-time highs in occupancy (65.6 percent) and average daily rate (ADR of $120.01). The 2015 RevPAR represents 6.3 percent growth over 2014, which, while robust, was slower than the 8.3 percent growth experienced in the prior year. The full-year 2015 results incorporate a strong Q1 beginning and a subdued Q4 ending, so that the full-year average masks weakening performance during the year. In Q4 2015 RevPAR was 4.8 percent above that of Q4 2014, down from the 8.9 in Q4 2014 from Q4 2013.
RevPAR performance for Q4 2015 is a good indicator of what we can expect in 2016, given the daily mark-to-market pricing structure of hotels. In both rising and falling market conditions, data for the trailing three-month period provides a better directional gauge than an annual result.
Occupancy rose to an all-time high in 2015 due to strong demand and limited new supply.
As supply continues to gain momentum and growth in demand slows down, Moody’s expects that supply and demand will reach equilibrium in the next 12-18 months before tipping the scale to where supply growth exceeds demand increases.
The U.S. RevPAR growth rate slowed to 6.3 percent in 2015 from 8.3 percent in 2014. While a year-over-year growth rate of 6.3 percent is strong, it masks the underlying trends. The 2015 annual average was propped up by a very strong Q1 performance, which drifted through the middle part of the year before ending with a weaker-than-annual-average Q4 result. Exhibit 1 shows that the 2015 RevPAR performance, on a monthly year-over-year comparison basis, has decelerated.
The ability to price rooms on a daily basis can be a blessing or a curse, depending on position in the cycle. Because of this potential volatility, it is important to look at performance of current month, running three months, and running 12 months to gauge shifts in pace or direction.
For the first three months of 2015, RevPAR grew at a weighted average rate of 8.0 percent, roughly continuing the full year 2014 RevPAR growth rate of 8.3 percent.
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