Leading hotel groups recently reported weaker than
expected third-quarter U.S. growth in revenue per available room (RevPAR),
stoking some concern that a domestic slowdown could be on the horizon.
Marriott International posted North American RevPAR growth
of just 0.6% for its third quarter ended Sept. 30. By comparison, Marriott saw
RevPAR grow 1.9% worldwide over the same period.
"The surprise and disappointment for us in the third
quarter was purely about U.S. RevPAR performance in September," which was
down 1% for the month, said Marriott president and CEO Arne Sorenson in a call with
analysts. "It had an impact on third-quarter RevPAR [in North America],
and it does affect our expectations for the fourth quarter."
Marriott adjusted its fourth-quarter outlook and now
projects overall RevPAR to grow by 2%, versus a previously forecasted range of
around 2.5% to 3%.
Sorenson attributed the September results to 2017's
hurricanes in Houston and Florida (which drove higher occupancy and created
tough comparisons with the same period last year) and holiday calendar shifts
as well as an overall decline in transient demand.
Sorenson went on to add that Marriott's U.S. performance "was,
by and large, reassuring" for October, while emphasizing that the company
does not expect challenges in 2018's third and fourth quarters to impact early
projections for 2019.
"The sky is not falling, notwithstanding the weak
September," Sorenson said. "When we look at our first quarter, we see
fairly good group bookings on the books, and that tells us that we can expect a
sort of 'steady as she goes' for the overall year in 2018 and as we head into
2019."
Marriott's recent U.S. deceleration, however, is not an
outlier.
For its third quarter, InterContinental Hotels Group (IHG)
posted a U.S. RevPAR decline of 0.5%. That news came as the company reported a
1% gain in global third-quarter RevPAR growth for the period, buoyed in part by
strong performances in Canada, Mexico and the Latin America and Caribbean
regions.
Likewise, Hyatt Hotels saw select-service hotel RevPAR in
the U.S. slip 1.1% in the third quarter, even as total U.S. RevPAR and full-service
U.S. RevPAR were up 1.4% and 2.5%, respectively. Globally, Hyatt posted a
RevPAR jump of 2.8%.
In an investor call in October, Patrick Grismer, Hyatt's
then-CFO, reported that the company "did see better performance out of our
international owned and leased properties from a RevPAR growth perspective than
we did for our U.S.-based owned and leased hotels." Grismer, who has since
left the company to become CFO at Starbucks, added that Hyatt expects "the
U.S. will be a bit softer" in the year ahead.
Hilton also saw its third-quarter domestic RevPAR growth
well outpaced by international markets. The company reported a relatively
modest U.S. rise of 1%, while Hilton's total RevPAR was up 2% globally in the
quarter, bolstered by solid traction in Europe and the Asia-Pacific region.
Hilton president and CEO Chris Nassetta said, "While
one market is slowing -- in this case, the U.S. -- all of our international
markets continue to pick up."
Like Sorenson, Nassetta laid some blame on the U.S. market's
hyperactive 2017 hurricane season.
"You're still seeing kind of a continuation of the
tougher comps, where the storms and the other weather-related events,
particularly in the United States, just generated a lot of business last year,"
he said.
But despite the third-quarter headwinds, Nassetta remained
bullish on the coming year, adding that an anticipated end to rampant supply
growth in the U.S. could help bolster business.
"Looking ahead to 2019, positive macro indicators
suggest continued strength in lodging demand," he said. "This,
together with decelerating supply growth in the U.S., should lead to
fundamentals remaining positive."
However, according to Kevin Kopelman, a director and
research analyst covering hotels and online travel at Cowen, a supply drop-off
could be "a double-edged sword" for the U.S. hotel industry.
"Slowing supply due to construction issues also means
that their new hotels are opening up more slowly than expected," Kopelman
said. "And opening up hotels is a key driver of business."
Meanwhile, despite some investor apprehension, Kopelman
added that he's not overly alarmed about the hotel sector's third-quarter
challenges.
"I don't think we should read too much into what
ultimately amounts to mostly a comps-driven issue in September," he said. "That
being said, it's important to point out that those comps were worse than
expected, and they're going to continue in November and December. And given
stock market volatility and the macroeconomic backdrop, I don't want to totally
downplay concerns.
"You have a situation where investors are worried, not
necessarily because they see weakness today, but because they're concerned that
there could be weakness going forward, so they're looking for signs. It's
something we need to watch carefully."