MMI: July Hotel Occupancy Hits New High

CALABASAS, CA—With the lodging sector's upswing now in its fifth year and showing few signs of losing steam, Marcus & Millichap says the latest monthly numbers attest to the industry's strength. July saw the highest-ever recorded monthly occupancy rate, a metric that in turn helped lift other performance measures.

Room nights across the US increased 3.5% last month to drive up nationwide occupancy to 75.3%, a year-over-year increase of 170 basis points. ADR rose 5.9% and accounted for most of the 8.3% improvement in RevPAR seen in July, an increase that MMI says illustrates the “considerable latitude” hotel operators continue to wield in pricing rooms. Double-digit RevPAR gains were seen in several of the 25 largest markets.

The strength of the dollar was no deterrent to international travel last month, according to MMI. Among gateway cities, only San Francisco posted a nominal drop in occupancy. Conversely, New York City's occupancy rate rose to 88.6%.

However, MMI says the growth in rates paid by guests was minimal, perhaps reflecting the use of discounts to foreign tour groups to compensate for adverse exchange rates. Overall, the firm says, foreign travel to the US is holding up, though unfavorable currency valuations and slower growth in China may impact visitation in 2016.

Even as room completions in Houston, Miami and New York powered a 1.2% gain in available rooms nationwide, MMI notes that an inordinately high six of the top 25 markets also recorded a drop in supply in July. While available rooms decline when properties are taken out of service, it's likely that some of the decreases last month included temporary closures for property refreshes and re-flagging.

Looking back over the year thus far, MMI reports that the hotel sector “sailed through the first seven months” and will reach new recorded highs in occupancy, ADR and RevPAR this year as the US economy continues to expand. The firm expects annual occupancy to rise 120 basis points to 65.6%, the highest full-year level in the 28 years of it has kept records. Elevated occupancy will support a 5.2 percent jump in the daily rate, which will underpin most of a 7.1% gain in RevPAR, thus encouraging further investment in the sector.