U.S. Hotel Rates Rise as Room Demand and Revenue Hit All-Time Highs

U.S. hotels can't keep up with room demand and that's causing them to see lower occupancy increases as average daily rates and revenues continue climbing, hotel data company STR found.

Room occupancy and supply saw the smallest year-over-year increases for February compared with other indicators given that demand is growing faster than the number of available rooms.

STR said rising average daily rates will drive revenues the most this year as hotels wait for more properties to open to help year-over-year occupancy levels increase, even though overall occupancy is at 64.8%.

This trajectory takes shape particularly with luxury hotels, which reported a 5.5% increase in average daily rates and a 0.7% increase in occupancy year-over-year for February.

Room demand, average daily rate, revenue per available room and room revenue are each at all-time absolute highs for the 12-month period from February 2014 to February 2015. The average daily rate in the U.S. is about $115 and the revenue per available room figures in at $75 (8.5% increase year-over-year).

New York City, which had the most rooms under construction last year, has average daily rates 1.7% lower than 2014 while Miami has the largest increase (9.1%).

February 2015 U.S. Hotel Snapshot

U.S. Hotel Growth Forecast

Source: STR

There's good news from this room crunch: as the number of rooms under construction rise (32% increase year-over-year in February 2015), the number of rooms closing has fallen. During 2005 nearly 65,000 rooms closed and last year a little over 23,000 closed -- nearly 25% were located in Atlantic City, New Jersey.

Some 436,000 hotel rooms are under contract for construction in the U.S. as of February, an 18% increase year-over-year. Select service hotels such as Holiday Inn Express and Hilton Garden Inn make up much of that growth as 94,000 new rooms are slated to open by the end of this year.

2015 U.S. Hotel Pipeline (Thousands)

Source: STR