By Roland Murphy for Arizona Builder’s Exchange
Even though hotels across the country aren’t quite feeling optimistic enough about the market to raise prices much at the moment, the pipeline for the sector is showing respectable growth.
According to the September 2017 Pipeline Report from specialty data and analytics firm STR, nationwide there are more than 585,000 rooms in nearly 4,900 hotel projects under contract, a 6.6 percent increase in rooms under contract from Sept. 2016.
STR’s under contract data includes projects in the In Construction, Final Planning and Planning stages.
How is the Phoenix Market?
STR’s announcement only showed numbers for the top ten overall markets, which did not include Phoenix Metro. Since we have something in the neighborhood of 91 hotel or hotel-related projects in the AZBEX Database with statuses ranging from “pre-planning” to “under construction”, we reached out to STR’s staff for more information.
The follow-up data they provided showed Phoenix doing reasonably well. In the Planning stage they show 2,453 rooms across 16 projects, a year-over-year 33 percent change. For Final Planning – where the project will go out for bids or construction is planned to start within four months – Phoenix has 3,145 rooms in 27 projects, for a percent change of 77.8.
The only area where Phoenix had a negative year-over-year percent change was the In Construction segment. There, the 1,754 rooms in 13 projects showed a 13.1 percent decline.
Nationally, there were more than 188,000 rooms in 1,440 projects, a 5.7 percent year-over-year increase for the In Construction category. New York City led the country at 13,533 rooms.
“The overall room construction total was down from last month, but outside of Houston, there wasn’t a noticeable decline in activity around hurricane-affected markets,” said Bobby Bowers, STR’s Senior VP of Operations. “There is still potential for that to change in next month’s reporting if damage to existing sites and increased material costs continue to remain a challenge. Regardless, construction activity and the total pipeline remains up year over year – just at a lot lower rate of growth compared with 2016.”
After New York, three other markets reported more than 5,000 rooms In Construction,” the report said: “Dallas (7,047 rooms); Nashville, Tennessee (5,497 rooms); and Las Vegas, Nevada (5,125 rooms).”
“The impact of new supply coming online is already visible in occupancy rates among the major markets,” Bowers said. “Demand in those markets continues to grow at a healthy clip as well, but not enough to lift hotelier pricing confidence.”
Occupancy, ADR and RevAPR
The hotel business, nationally, is doing well on the whole. In a report emailed Oct. 19, STR stated that in Q3 2017 versus Q3 last year, Occupancy was up 0.5 percent to 71.4 percent, the Average Daily Rate was up 1.4 percent to $129.12, and Revenue Available Per Room increased 1.9 percent to $92.20.
“The 71.4 percent occupancy level was the best for a third quarter since 1995,” Bowers said. “That was especially significant given that supply grew year over year at a higher rate than any quarter since Q2 2010. Demand (room nights sold), at the same time, was up almost 8 million room nights from the third quarter of last year. But even with solid demand, ADR growth was the worst since Q4 2010, and RevPAR grew at its lowest rate since Q1 2010.”
For the Phoenix Metro area, Occupancy was up 0.9 percent for Q3 year-over-year to 58.4. ADR dropped $0.82 to $90.21, and RevPAR increased slightly, up $0.28 to $52.64.