Arkansas hotels fall behind record-setting U.S. average on Q3 occupancy

by Jennifer Joyner (JJoyner@nwabj.com) 217 views 

National hotel occupancy was 71.4% in the third quarter of this year, marking a record-high since 1995, according to the industry statistics resource STR. The average increase over 2016 was 0.5% in occupancy nationally. In Arkansas, occupancy dropped 3.7% from 2016 to 56.9%.

Chet Patel, president of Pinnacle Hotel Group in Little Rock and incoming chair of the Arkansas Lodging Association, said he has not looked at the latest numbers while busy this week opening Agasi 7, the region’s first rooftop, open-air restaurant above Hilton Garden Inn Little Rock Downtown. However, he knows business has been slower than usual overall.

Pinnacle Group owns seven hotels in central Arkansas, including America’s Best Value Inn & Suites, the Holiday Inn West in Little Rock and the Holiday Inn Express in North Little Rock. The group also owns the Comfort Inn, Sleep Inn and La Quinta Inn & Suites in Fayetteville.

“We’re not seeing that growth we saw last quarter. … It slowed down sooner than expected. Our more challenging quarter is still ahead of us,” said Patel. “We’re so dependent on the university and the ball games for those extra bumps in business,” he said.

The University of Arkansas Razorbacks schedule and the team’s poor performance might have affected business, he said.

In Northwest Arkansas, occupancy rates were 65.3% in Bentonville, down 0.1% from last year, 69.9% in Fayetteville up 1%, 70.5% in Springdale, down 0.5% and 70.1% in Rogers, down 0.1% from 2016, according to STR.

“My opinion on the decrease in our market occupancy year over year is it was due to less Razorback football games in September this year, versus last year and with the one good game where we all predicted to sell out — University of Arkansas vs. Texas Christian University — it did not happen,” said Annette Nichols, general manager of Hyatt Place in Rogers.

She also pointed to underwhelming occupancy during the annual regional event Bikes, Blues & BBQ.

“Also, not selling out again this year for BBBQ Festival as in past years, was a hard hit too. I think that is due in large part to the hurricanes and flooding that hit Houston and Florida,” Nichols said.

Hurricane Harvey hit Houston in August, and Irma hit Miami weeks later.

“Our hotel gets large groups each year from the Houston area, and they weren’t able to travel this year due to having to clean up and repair or rebuild after the storms,” Nichols said, adding that she believed BBBQ business also was affected by a new campgrounds opening in Fayetteville and more Airbnb properties open during the time.

Fort Smith, Jonesboro and Little Rock North/Little Rock each showed drops in year-over-year hotel occupancy. Jonesboro showed 59.1% occupancy, down 7.2% from 2016, Little Rock/NLR had 59.4% occupancy, down 2.6% from the previous year and Fort Smith was at 60.2%, down 4%, according to STR.

The average daily rate for rooms was up 1% statewide to $82.03, and several metro areas showed increases. ADR in Springdale was $78.47, up 3.1% from 2016. Jonesboro was $86.40, up 3%. ADR in Fayetteville was $93.74, up 1.1%. Bentonville was $98.91, up 1.9%. Rogers hotels had an ADR of $106.12, up 4.5% from the previous year, according to STR. Fort Smith’s ADR was $71.79, down 2.3%, while Little Rock/NLR was $84.78, down 4%, according to STR.

“ADRs were strong during the third quarter, thanks to popular entertainment acts brought to the [Walmart] AMP and corporate meetings in the area,” Nichols said, speaking to performance in Rogers and NWA. “Therefore, higher rates had to compensate for less occupancy, which provided the increase you see in RevPAR [revenue per available room].”

RevPAR fell statewide and also for Jonesboro, Fort Smith and Little Rock/NLR, while NWA showed positive growth in RevPAR, though it also falls below the national average of $92.20. Statewide, RevPAR was $46.69, down 2.7%. Rogers showed RevPAR of $74.41, up 4.4%. Fayetteville, Bentonville and Springdale each showed modest gains in RevPAR, at $65.51, $64.57 and $55.35, respectively, according to STR.

“I think all hotels are hoping for a more positive and consistent 2018, but I do feel occupancy will stay flat & any increase in revenue will be due to higher ADRs,” Nichols said.

Statewide, supply was up 9% in the hotel industry, demand was down 2.9% and revenue was down 1.9% at $212.7 million, according to STR. Revenue was up in Fayetteville ($11.05 million), Bentonville ($11.57 million), Springdale ($8.15 million) and Rogers ($14.04 million). It was down in Jonesboro ($7.22 million), Fort Smith ($10.03 million) and Little Rock/NLR ($44.81 million), according to STR.

Supply was down slightly in Fayetteville, Bentonville and Rogers. It was flat in Springdale and Jonesboro, up 1.5% in Little Rock/NLR and up 3.7% in Fort Smith.

Demand was up slightly in Fayetteville and down slightly in Bentonville, Springdale, Rogers, Fort Smith and Little Rock/NLR, while demand in Jonesboro dropped 7.2%.

MIDSCALE OVER UPSCALE
On a national level, STR calls for stronger-than-expected growth overall for the year — with midscale and independent hotels faring the best — and for decreases in occupancy in 2018 to be balanced with increases in ADR and RevPAR.

STR forecasts 2017 will show a 0.5% increase in occupancy to average 65.7% overall for the year, in addition to a 2.1% rise in ADR to $126.66 and a 2.5% lift in RevPAR to $83.23.

Midscale and independent hotels are projected to show the largest increases in occupancy at 0.9%. Independent hotels are also projected to post the most growth in ADR (2.8%) and RevPAR (3.7%). Upscale hotels are project to show growth in overall RevPAR for 2017, but it shows the slowest growth of the industry segments at 1.1%, according to STR.

RevPAR for all U.S. hotels has grown more than 3% for each year from 2010 to 2016, according to STR.

“Due to stronger demand, occupancy growth has exceeded earlier forecasts. At the same time, ADR growth has been more muted than expected given the record occupancy level,” Jan Freitag, STR’s senior vice president of lodging insights, said in a press release. “The third quarter was difficult to parse because of the disruptions from Hurricane Harvey and Hurricane Irma, but we know that demand was lifted in a number of major markets as a result. Looking past the shifts in the data, we think hotel performance should remain steady — very much like current economic conditions.”

For 2018, STR projects the U.S. hotel industry to report a slight decrease in occupancy to 65.6% but 2-point increases in both ADR ($129.64) and RevPAR ($85.06).

“We built this forecast under the assumption that there will be tax legislation and a subsequent improvement in GDP growth next year,” Freitag said in the release. “Better ADR growth than 2017 would then better offset an expected decline in occupancy. Regardless, we expect more moderate performance growth overall.”

While other segments are projected to show decline in occupancy, STR projects independent hotels will report flat occupancy and the largest increase in RevPAR at 2.3%.

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