BROOMFIELD, Colorado, and HENDERSONVILLE, Tennessee—With the first contest of the 2020 presidential primary season only days away, hotels around Iowa are likely already seeing elevated performance. This analysis looks back at the primary and caucus performance impact to hotels in key, early states.
The hotel performance impact of a primary or caucus is unusual when compared to other market events such as the Super Bowl or a Final Four game, in that the demand is largely generated by the media and campaigns themselves; there aren’t necessarily “spectators” traveling to watch the event. The actual participants in the event—primary voters or caucus-goers—are local, and therefore don’t contribute significantly to the hotel demand.
Key takeaways:
- In the days leading up to the caucuses, Des Moines, Iowa, typically records year-over-year average daily rate and occupancy growth exceeding 50%, which also lifts monthly performance significantly.
- In an election year, the peak ADR day for the Des Moines market comes in the days immediately preceding the caucuses, and the pricing premium achieved on that day has grown since 2000.
- ADR growth in New Hampshire has historically been strongest in years with a contested primary in both parties.
- Portsmouth/Manchester, New Hampshire, hotels earn an additional $4 million to $6 million in revenue in the caucus month when compared to the same month in the previous year.
Iowa: First in the nation
Iowa has held the first contest of the presidential primary season since the 1970s, and a combination of the unique caucus system and the state’s “first-in-the-nation” status has brought it increased campaign focus and media attention leading up to the caucuses. The caucuses typically take place in January or early February on a Monday, although 2008 and 2012 occurred later in the week due to the caucuses’ close proximity to the New Year. The lead-up to the caucuses also typically include debates, forums and other events that attract media attention and may increase hotel demand.
The impact on performance is most noticeable in the three days leading up to the caucuses. For instance, in Des Moines, the largest market in Iowa, year-over-year daily percent changes in occupancy and ADR have been greater than 50% for each caucus since 2004. Impacts on performance are much more subtle in Iowa’s small towns and rural areas, which have typically seen year-over-year increases of less than 15% in the few days before the caucus.
The strong demand impact in the days immediately surrounding the caucuses is enough to significantly lift monthly performance as well. Historically, the Des Moines market has seen a RevPAR lift of between 17% and 33% in the month either containing or immediately preceding the caucuses.
Typically, this RevPAR growth is affected most by ADR growth, with January 2016 posting an ADR nearly 23% higher than the previous January. This ADR increase resulted in the market earning $5.6 million more in rooms revenue than the previous January. For reference, in the other 11 months of 2016 combined, the market brought in only $8.4 million more than the same months in the previous year.
The more muted monthly growth in 2008 and 2012 was not necessarily tied to caucus turnout (with near record turnout in 2012, and strong daily RevPAR growth), but likely was more heavily impacted by the caucus timing.
Upper-upscale and luxury hotels are likely to see the greatest ADR growth from the caucuses, with more than 40% growth in 2016, the last presidential election year. There are only eight hotels totaling around 1,800 rooms in the upper-upscale and luxury classes, so with such a small amount of full-service supply available, it’s unsurprising that these hotels are able to achieve the greatest pricing premium.
Daily rate premium
In a typical year, the Des Moines market’s peak daily ADR usually occurs either during the Iowa State Fair in August or on New Year’s Eve. In a presidential election year, the peak ADR consistently falls on the night before the caucuses—or two nights before, in the case of 2008.
This caucus pricing premium has been growing over the past five presidential election years. In 2000, the Sunday before the caucuses posted an ADR 34.7% higher than the market’s annual ADR. By 2016, that ADR premium had grown to 58.4% between the pre-caucus Sunday ADR and the annual ADR.
New Hampshire
The New Hampshire primaries have been the first primaries in the nation since 1920, and in recent years have typically fallen on the Tuesday in the week after the Iowa caucuses.
As in Iowa, the most noticeable impacts on occupancy and ADR are recorded in the few days leading up to the primary in New Hampshire. In the Portsmouth/Manchester market, occupancy and ADR have historically spiked by greater than 60% year over year in the three days leading up to the primary, with the largest spike in occupancy occurring before the 2008 primary. ADR more than doubled year over year during the 2008 and 2016 primaries—both years in which both a Republican and Democrat were seeking nominations.
Monthly RevPAR lift generated by the New Hampshire primaries is more heavily influenced by an ADR premium leading up to the event. In the past five elections, the statewide RevPAR growth has exceeded 25% in January of the election year (February for 2016). This growth is even more pronounced in the Portsmouth/Manchester tract, which alone has seen ADR growth of at least 25% in all of the past five presidential election years. From 2000 to 2012, this ADR growth translates to an additional $4 million to $5 million in rooms revenue collected by the market in January of a presidential election year, compared to January of the previous year. In February 2016, this figure grew to $6.3 million in additional rooms revenue compared to February 2015.
At both the state and submarket level, occupancy growth does not seem tied to turnout or presidential incumbency. However, similar to the trend in the daily data, ADR growth was (slightly) lower in both 2004 and 2012, when one party had an incumbent president.
Interestingly, upper-upscale and luxury hotels in New Hampshire have recorded the smallest ADR impact from the primaries, which is the opposite of the trend in Iowa. Many of these hotels in the upper classes are outside of New Hampshire’s most populated cities of Nashua and Manchester, and some are located near ski resorts. Therefore, they are likely an illogical choice for media and campaigns due to their more remote location, and they may already be busy with ski-related demand.
Looking ahead
The impact of the upcoming caucuses and primaries is uncertain; although one party has an incumbent president, the large field of candidates in the Democratic Party could bring even more attention than seen in previous years to the early contests.
The Des Moines market recorded 5.7% supply growth in 2017, and 6.7% in 2018, meaning that a greater number of hotels will be competing for the increase in demand and revenue that the caucuses typically bring. Portsmouth/Manchester has shown very little supply growth in recent years, so any demand and revenue growth has the potential to significantly impact the hotels in the market.
Hannah Smith is a consultant in STR's Consulting & Analytics division. Will Sanford is a Research Analyst at STR.
This article represents an interpretation of data collected by STR, parent company of HNN. Please feel free to comment or contact an editor with any questions or concerns.