Q&A's for Hospitality In 2018

December 21, 2017 Cody Putman

 

Budgets are baked for 2018, and with the new year upon us we all want a crystal ball to understand what’s ahead. Last week, we caught up with Jan Freitag, senior vice president at STR to discuss important trends for 2018. Jan shared up-to-date 2017 performance data and STR’s forecast for 2018, and included a custom view of their data for independent hotels.

 

We also discussed the leisure travel market and a few changing traveler behaviors originally reported by MMGY that independent hotels and vacation rental property managers need to consider in 2018. If you haven’t yet watched the webinar, click here for this informative hour of industry data and discussion.

 

Here are a few of the highlights from our discussion:

 

QUESTION – 2017 US hotel industry data – particularly occupancy and RevPAR - looks really strong; should we expect more high growth in 2018?

 

ANSWER: In aggregate, the hotel industry had a record setting year in 2017. According to STR, occupancy is at an all-time record level 67.6% (thru October) and RevPAR grew 4.1% (in October YoY). But taking a closer look uncovers that hotel performance in Texas and Florida is responsible for the bulk of this RevPAR increase.

 

Displaced residents and an influx of storm recovery workers following the two hurricanes have delivered disproportionally higher results. In fact, both states benefited from 5 to 7 times the increase that the rest of US has realized. Stripping the data from these two states out of the calculations shows the industry really only grew RevPAR at a more subdued 2.3%.

 

In 2018, Jan and his STR team expect the industry to continue to perform well. They forecast a 2.2% increase to RevPAR driven by a 2.4% growth in ADR.

 

 

QUESTION: How have independent hotels performed compared to the brands in 2017?

 

ANSWER: While brands have experienced twice the growth in demand compared to independent properties this year (3.0% v 1.4%), independents have successfully grown RevPAR twice as fast this year clocking a 4.4% increase through October (2.1% growth for brands during the same period). This larger RevPAR was driven by larger gains in both occupancy (1.4% to 0.4%) and ADR (2.9% to 1.7%).

 


QUESTION: How is leisure travel expected to perform in 2018 compared to this year?

 

ANSWER: According to MMGY, leisure travel accounts for roughly 75% of all hotel stays in the US. Throw in all the additional stays from the fast-growing vacation rental segment, and it’s more than fair to say leisure travel is driving the bus.

 

Through their annual Portrait of American Travelers research study, MMGY has learned the single most important determinant to whether leisure travel rises or falls is travelers’ optimism in their job.

 

In their most recent 2017-2018 survey, job optimism dropped seven points to 66% despite the many positive economic indicators – stock markets, inflation, CPI, etc. This suggests that leisure travel will grow in 2018, but at a slower rate than in 2017. Which is great news for many of us.

 

 

QUESTION: Where are Americans traveling to in 2018 for vacation?

 

ANSWER:  A whopping 40% of US vacationers are expected to travel to new destinations in 2018, according to MMGY. With international travel expected to be down among Americans, US hoteliers and vacation rental managers have a fantastic opportunity to attract and book new guests looking for a new place to spend their vacation.

 

Marketing departments needs to ensure their property is discoverable where travelers look for inspiration in choosing their destination – online! In 2018, think about ways to extend your reach (e.g. buying additional keywords or expanding online partnerships with your CVB) to attract these potential guests.

 

New guests also have more questions than a returning guest, and thus are more likely to call you in their quest for the perfect vacation experience. Prepare your reservation agents to handle these calls and give them the tools to collect lead information from each caller. Potential new guests are also less likely to book on the first call than a returning guest, so it’s important your agents collect personal information that enables your team to nurture more of these inquiries into bookings.

 

 

QUESTION: Road trips are expected to be more popular in 2018; what impact will that have on marketing?

 

ANSWER: Drive markets have always been an important source of bookings and a key target for marketing departments everywhere. In 2018, they’ll be even more important. MMGY’s Portrait of American Traveler study found that 39% intend to take a road trip in the next year, a staggering 17-point jump from the previous year.

 

Segmenting your markets to effectively target drive markets will be key to seizing this opportunity in 2018. Ensure your CRM gives your team the power to identify and build high value lists, and then create and deliver personalized communications quickly. Drive markets typically have more flexibility in booking last minute, so work on shortening marketing team cycle times so they can produce campaigns more responsively.

 

For more industry data, tune into our recent 2018 State of the Industry webinar to hear more from STR’s Jan Freitag. Topics include hotel supply, construction pipeline, and class and chain scale performance metrics. 

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