Hotel revenue on the rise in most of Arkansas, especially in NWA and Jonesboro

by Jennifer Joyner ([email protected]) 445 views 

Hotels in the northern half of the state saw increases in key performance metrics in 2016, with the Northwest Arkansas region and Jonesboro posting the highest gains in revenue per available rooms over the last five years.

Hotels in the Fayetteville-Springdale-Rogers-Bentonville metro area showed a 64% gain in revenue per available rooms from 2011 to 2016, according to data from STR. That information came as no surprise to Montine McNulty, executive director of the Arkansas Hospitality Association, who said tourism tax revenue has shown good growth statewide, but especially in NWA.

“Business is strong and continues to be strong in general, and a lot of the hotel visits in Northwest Arkansas are based on business traffic during the week,” McNulty said.

At the same time, the region is ramping up its attractions and weekend visitors with Crystal Bridges and many other additions, she said.

“It’s becoming known, for example, as a great dining area of the state, and there’s some really exciting restaurants and food options, not to mention the trails and outdoor interest in that area of the state. The cities have come together and developed a really strong network of trails, biking and other outdoor things. I think it’s just adding on. It’s just going to get better and better,” McNulty said.

However, in spite of the NWA industry’s upward trajectory, its hotels, along with other areas of the state, still make less money per room available than markets in the rest of the country. At $58.77, NWA’s revenue fell below the 2016 national average of $81.19 per available rooms, according to the STR data. Occupancy in NWA hotels held up to the national average, but the average daily rate for a single room was about $35 cheaper in NWA than in the rest of the U.S., driving room revenue down.

The average room rate in NWA was $89.41 in 2016, indicating a steady climb in prices from five years ago, when rooms cost $70. The rate marks a 6% increase over 2015 and a 28% increase from 2011 to 2016, according to STR.

In Jonesboro, revenue per available rooms was $50.45, up 8.2% from last year and up 55% from five years ago. Its room rates have risen by about a quarter since 2011, now averaging $82.61.

“I think northeastern Arkansas has increased the quality of its hotel rooms and its hotels. I think that is helping them do very well, as far as travel. They’re attracting more people,” Montine said.

In the last few years, there also has been increased focus on tourist draws in the region, including biking trails and the childhood home of Johnny Cash in Mississippi County.

The Fort Smith region also saw a significant increase in revenue per available rooms over the last five years. For a swath of western Arkansas covering Fort Smith, Russellville and the Interstate 40 corridor that connects the two cities, hotel revenue per available room was $43.02, up 7% from 2015 and up 42% since 2011, according to STR. The average daily rate was $73.05, up 3% from the previous year and up 12% from five years ago.

In Little Rock, revenue per available room was $45.36 in 2016, up 10% from five years before. Its room rates also saw an increase, but the rise was more incremental than in NWA, from $80.06 in 2015 to $80.72 in 2016 and showing a 10% rise since 2011.

Nationally, revenue per available room grew more than 3% for each year from 2011 to 2016.

McNulty stressed that the key metrics to watch within the hotel industry – occupancy, average daily rate and revenue per available room – play off of each other.

The more competition there is, the fewer rooms there are, the higher the rate will be. It’s all to be expected,” she said.

Nationwide, occupancy was nearly flat compared to 2015 at 66%, according to STR. While NWA matched that average rate, for the region it represented a two-point bump from the previous year and a jump from five years before, when its occupancy rate was 51%.

“To have that kind of increase is wonderful,” McNulty said, adding that the hotel industry was especially slow to recover from the Great Recession of 2008. “When the economy went into the tank, occupancy dropped and room rates dropped then. The hotel industry is just really pulling out of that now. And getting back to where they were before the recession.”

The Fort Smith/Russellville area had a 59% occupancy rate, showing a 12-point gain since 2011. Hotel occupancy rates in Little Rock have been relatively steady in the past five years, staying in the 56%-58% range since 2011, according to STR. In 2016, the rate was 56%.

Overall, hotels in the NWA metro area rang in $169 million in revenue in 2016, showing a 7% increase over the previous year and a 58% increase over 2011, according to STR. STR estimated supply was down slightly from the previous year and down 3% from five years ago, while demand was up slightly from last year and showed a 24% increase since 2011.

Overall in the Fort Smith/Russellville area, there was $73 million in hotel revenue in 2016, showing a 35% increase since 2011. STR said supply was down 2% in the Fort Smith/Russellville area in 2016, showing a 5% decrease from five years ago. It estimated that demand was up about 2% since last year and up about 20% from 2011.

Little Rock hotels made $214 million in revenue, marking a 3% increase 2015 and a 20% increase since 2011, according to the data. STR estimated hotel supply in Little Rock was up slightly from the previous year and up 9% from five years ago, and demand was up slightly since last year and up 9% since 2011.

On a national level, STR projects steady but slow growth for the industry during the next two years, driven by higher prices, not higher occupancy. While occupancy has been flat in recent years, the STR is predicting very slight decreases in the U.S. industry, at 0.3% and 0.2% for 2017 and 2018, respectively. STR predicts the average daily rate will rise 2.8% each of the two years, and revenue per available rooms will increase an average of 2.55% each year.

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