Analyzing Hotel Operating Profitability

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STR Analytics recently analyzed the 2012 profit and loss data from more than 6,000 hotels across North America to determine what the most profitable establishments have in common.

Dividing the total survey between full-service and limited-service (hotels with less than 5% of revenue coming from food and beverage as compared to revenue), and comparing these groups as a whole with the top 10% in each category, STR was able to glean some important information hoteliers should consider going forward.  Here is a brief overview of the analysis findings.

Key Statistics

-Room count differences between the Top 10% of hotels and survey average is not striking in the limited-service category (Total-114, Top 10%-123), but they are in the full-service category (Total-287, Top 10%-183).  This might attribute to smaller full-service hotels typically having leaner food-and-beverage operations, which lend toward greater profitability.

-Chain affiliation lends to a hotel’s profitability in both the limited- and full-service categories.  When comparing limited-service properties, 96% of all hotels of this type were brand-affiliated while 98.1% of the Top 10% fell under the brand umbrella.  In the full-service category, the Top 10% showed similar brand-affiliation as the limited-service category (98.4%), while industry-wide this number was only 88.8%.

-The most telling statistic in this study found that the average daily rate (ADR) was lower and the average occupancy was higher in the Top 10% of both limited- and full-service hotels than across the industry average.

During the past few years, demand has recovered from the previous peak of 2007 at a faster rate than ADR.  As demand continues to break records and ADR plays catch-up in the markets where it has yet to reach previous peak levels, there is an expectation of a positive impact on overall U.S. hotel industry profitability.

To dive deeper into the numbers and to read more about what makes the top hotels in the U.S. profitable, click here.

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