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March 17, 2020 at 7:00 am

What’s Up in the Hotel Business?

by Sean Riley, President & CEO, Maine Course Hospitality Group

Great Ride for Hotels

I recall speaking at the MEREDA conference back in 2009. It was a tough year to begin my motivational speaking career.  But what a remarkable recovery this industry has had. Looking back, Occupancy was 54.6%. This past year was the tenth consecutive year of growth, up to 66.2% (a record).  Average Daily Rate (ADR) saw impressive gains as well from the $97 range in 2009 to $133 (a record) in 2019. RevPAR went from $54 to over $86, and is considered the true test of strength for hotels.  To sum it up, it was a great 10 years to be in the hotel business!

Roller Coaster Ride

For those who enjoy roller coasters, the exhilaration of climbing higher and higher is incredible.  But the fear of what happens when we reach the top of the roller coaster is scary.  Yes, we have enjoyed unprecedented growth and yes, we are a bit apprehensive of the ride back down.  But wait, the forecasters are saying it may just be a leveling off and coasting for a while. A summary of the many forecasting gurus, brands and hoteliers, suggest that 2020 and 2021 will see little, if any, growth. It’s tough to fathom this, given our ten years of growth, but its predictable and expected.  The good news is, most predict things to start climbing again in 2022 and 2023.  Hold on to your seats!

Construction Signs on the Roller Coaster

New construction has been exciting but can contribute to the dips in Occupancies and ADRs across the country. Hotel growth has increased YOY by 2 plus percent for years. One 2% increase isn’t bad, but the accumulative increase can cause some motion sickness on this roller coaster. Supply is still predicted to increase in the 2% range through 2021.  If demand decreases, as it is expected to do, and supply increases, it adds to the scariness of the ride.

The Maine Ride

Maine has also enjoyed the roller coaster, experiencing record highs. In 2019, occupancy was 58.9% with an ADR of $143.58.  But the growth slowed this year and is predicted to slow even more.  The supply growth slowed this past year, but not in the Portland area. Although downtown Portland has been on a great ride, the fear of over development is in the air. Although strong, Portland might fall the way of many great development stories like NYC, Orlando and Houston.  Not disastrous at this point, but a point of caution.

Ride Rules

Before entering the roller coaster ride, read the rules:

  1. Take care of your people
  2. Do your homework
  3. Develop relationships with local and regional banks
  4. Don’t over leverage
  5. Take care of your asset
  6. Stay Current with technology
  7. Stay current with industry trends
  8. Did I say take care of your people?
  9. Follow these rules and it will be a safe and enjoyable ride

Categories: Maine Real Estate Insider