PETER CRANIS: STR Forecast Report Indicates Average Daily Rates Will Be Over $123 This Year
By Peter Cranis, TDO Executive Director // March 5, 2022
growth in the short-term vacation rental segment is growing
BREVARD COUNTY, FLORIDA – What does the latest STR Forecast (Smith Travel Research) report say about the state of hotels in Brevard? It reinforces what we have been saying in this newsletter and reports for the past year.
ADR (Average Daily Rate) will continue to increase and inventory will continue to grow, thus holding occupancy numbers back.
The fourth quarter STR Forecast report has come out and what they are saying is that average daily rates will land at over $123 this year – a new record.
However, with the continued addition of hotel room inventory (16% growth in the past two years with another 500 rooms or so coming this year), occupancy will come in at 67%, just below the previous high of 69% for 2019.
I will take that as a win though. When looking at room night demand (the number of rooms rented), we are seeing continued growth, so we are keeping pace with the new inventory, it’s just going to take a minute for occupancy to catch up with all the new rooms. But we will.
And when comparing ourselves to our peer set, if you adjust occupancy for the new inventory, we are tracking well with them. In fact, Revenue Per Available Room (RevPar = Occupancy multiplied by ADR), a key metric that hoteliers look at when checking their profitability – will hit a new high this year – breaking $82.
The previous high was under $81 in 2019. To have record ADR and RevPar only 2 years after a major downturn in 2020 is quite incredible. And if we hadn’t had the huge inventory growth over the past 2 years, we probably would have had record occupancy as well.
The other factor that has been pushing down occupancy is the growth in the short-term vacation rental segment. Prior to COVID, vacation rentals represented approximately 27% of TDT. Now, a year later, they are running just under 31% of TDT.
Clearly, the consumer has shifted to some degree and this is pulling some people away from hotels.
Even in spite of that, STR is predicting that occupancy will break above 2019 levels in 2023, showing 73.2% occupancy the first 6 months of the year versus 72.7% in 2019. So, good news for hoteliers and anyone in the tourism business. More travelers coming to more hotel rooms, spending more on vacations.
– Peter Cranis, Space Coast Office of Tourism Executive Director