BOULDER, Colorado—After one full year of tracking the Top U.S. Markets’ RevPAR recovery, we are pleased to announce the winner is New Orleans.
New Orleans surpassed its September 2008 trailing 12 month (“TTM”) revenue per available room peak of US$75.53 by more than 3% with an April 2011 TTM RevPAR of US$77.95. New Orleans is the first Top U.S. Market since the downturn to reach its previous RevPAR peak.
As mentioned several times throughout the course of this article series, New Orleans likely never achieved its true RevPAR potential in the previous cycle because of its existing recovery efforts from Hurricane Katrina in 2005. Nevertheless, it is a milestone for New Orleans to signify that growth is back and a milestone for the Top U.S. Markets to suggest the word “recovery” will soon be replaced by “growth.”
There are several markets right on the heels of New Orleans that could hit previous peak RevPAR levels within the next few months, including Boston, Oahu, Hawaii, and Washington, D.C., which only need 5%, 7% and 8% RevPAR growth respectively to achieve their previous peak. In fact, Oahu, according to its strong 2011 year to date pace, could be the runner up. This edition of the RevPAR Recovery Race will highlight 2011 YTD RevPAR growth through April.
April YTD results
As a summary of the year-end 2010 results, New Orleans, Boston, New York, Miami and Denver were the top five “recoverers” in 2010. However, not even one of those top 2010 performers were among the 2011 YTD leaders. Moreover, the Top 5 from 2010 have fallen to the middle of the pack. In particular, New York City ranked third in the 2010 year-end results, yet it is ranked 25th based on 2011 YTD statistics.
The Top 5 YTD 2011 RevPAR growth markets are Oahu (5.7%), Dallas (5.5%), San Francisco (5.3%), Orlando, Florida, (5.1%) and Houston (4.6%). The following table details the 2011 YTD TTM RevPAR percentage growth as of April 2011. The chart is organized in descending order with Oahu, as mentioned above, appropriately featured in the top spot.
(Note: Utilizing the TTM time period helps normalize the data and substantiates a 12-month sustainable growth rather than a unique monthly/ seasonal irregularity.)
As the previous table indicates, many of the markets that had a strong 2010 recovery have slowed in pace and have thus fallen dramatically in relation to other Top U.S. Markets that had a sluggish growth pace in 2010. For example, Dallas and San Francisco both represented median 2010 recovery pace, but the markets are now seeing an increase in momentum as they experience the resurgence that other markets exhibited last year.
Ultimately, similar to economic cycles, the RevPAR recovery cycle will have new leaders and laggards depending on the time frame examined as each market reconciles its unique balance of occupancy and rate growth. For instance, New York City, which last year experienced formidable rate growth (7.5% 2010 average daily rate growth), is now experiencing the lowest occupancy growth of all the Top U.S. Markets with a 0.9% 2011 YTD TTM decline in occupancy. While we don’t intend to conclusively declare that this is a causal relationship, New York City’s growth pattern does help illustrate the strategic balance between ADR and occupancy growth that many markets, as recovery and growth continues, will need to establish.
The graph below plots each individual market on a X-Y scatter plot. The X-axis represents 2011 YTD TTM occupancy percent change while the y-axis represents 2011 YTD TTM ADR percent change since April 2011. The axes intersect at the Top Market’s average occupancy and ADR percent change, 1.9% and 1.2% respectively. Each orange dot represents an individual market. The number inside each dot is that market’s corresponding 2011 YTD RevPAR Growth Rank (1-26). We’ve labeled the Top 5 and the Bottom 5 markets to provide a guideline for interpreting the graph. The remaining market ranks are provided in the legend. The goal of this graph is to illustrate the method by which the markets achieved their YTD RevPAR growth. For example, Dallas, the No. 2 rank, has achieved a remarkably balanced 2.8% YTD TTM occupancy growth and 2.7% YTD TTM ADR growth.
Click chart to enlarge.
The previous graph, which STR Analytics calls the RevPAR Positioning Matrix (RPM), allows a more in depth understanding of the performances achieved amongst the individual markets. On this RPM, the blue axes represent the average growth of these Top U.S. Markets. It’s interesting to highlight that even though certain markets have relatively high ranks, they only achieved above average growth in one of the performance metrics—like Tampa, Florida, which experienced below average ADR growth but was still ranked amongst the Top 10 (No. 7). Meanwhile, other markets more moderately ranked, such as Anaheim, California (No. 13), experienced both above average occupancy and ADR growth. This illustrates that certain markets can exhibit growth in one metric more significantly than the other while attempting to achieve the most effective occupancy/ADR combination given the unique attributes of that market.
We invite you to analyze the tables and charts presented in this article for patterns and trends that you perceive as well. Keep following your market and we’ll continue to keep analyzing new ways of slicing and dicing this data. In the meantime, contact me at orly@stranalytics.com if you are interested in further information about these markets or the STR Analytics RPM reports.