Fall and the start of the holiday season has already started to bring gifts to the U.S. hotel industry as September revenues and profits were the strongest they’ve been since June.
Total revenue per available room (TRevPAR) was $223 and gross operating profit per available (GOPPAR) was $84, which were 6%-7% higher than September 2019.
For the entire U.S. hotel industry, estimated total revenues were 120% of 2019 levels and gross operating profit was 123%. For the first time since January 2020, labor costs per available room (LPAR) indexed above 2019 levels at $72, which was 101% of September 2019 levels.
Although labor costs continue to increase, hoteliers are successfully maintaining overall expenses. That will continue to be challenging with inflation sticking around.
Profit margins in September hit 38%, the highest realized since June and higher than the average margins realized each of the past four years. Fewer food and beverage options, less-frequent room cleaning, and the use of contract labor have all been strategies to curb higher expenses. But as guests start to demand more for the higher prices they're paying, hoteliers will have to get creative with different cost-management strategies.
For the top 25 markets, September was also a strong month, with 17 of the markets hitting TRevPAR levels above September 2019 and the remaining eight at more than 84% of 2019 levels.
All U.S. hotel markets recorded achieved at least 72% of 2019 GOPPAR levels, with the Minneapolis market realizing the lowest index at 72.4%.
On the labor side, 17 markets realized higher LPAR this September versus September 2019, with the remaining markets at greater than 86% of 2019 levels. The average LPAR for these markets in September was $74, with the high at $168 (New York) and the low at $30 (Detroit).
Year-to-date levels are starting to even out as all but two of the top 25 markets are above 80% of 2019 TRevPAR levels. Atlanta and San Francisco were the exceptions, at 63% and 79% of the 2019 benchmark, respectively.
The seven markets that have the highest TRevPAR indices are Miami, Florida; Orange County, California; San Diego, California; Tampa, Florida; Phoenix, Arizona; Nashville, Tennessee; and Orlando, Florida.
Six of these markets also have achieved GOPPAR higher than 2019 levels, and all except for Orange County have profit margins higher than 2019. Of these seven, only the Orlando market did not achieve earnings before interest, taxes, depreciation and amortization per available room beyond 2019 levels (currently it is at 99% of 2019 levels).
Only four of those top seven have achieved LPAR beyond 2019 levels, led by Orange County with LPAR at $93, which is 126% of the 2019 year-to-date level.
The other three markets are San Diego at 109% of 2019 LPAR, New Orleans at 101% and New York at 100%. New York had the highest LPAR in 2019 at $161 and is now at $122. The other markets with the highest LPAR were Oahu, San Francisco and Los Angeles, which are currently indexing at 91%, 73%, and 98% of their 2019 year-to-date LPAR levels, respectively.
Raquel Ortiz is director of financial performance at STR.