U.S. HOTELS GENERATED all-time high revenues in 2018, but collecting those funds is more challenging, according to CBRE Hotels Americas Research. At issue is a rise in uncollected credit card payments.
Both ADR and RevPAR rates reported a record high last year as the hotels hosted a record number of guests, according to the research report by CBRE’s Director of Research Information Services Robert Mandelbaum. The report is part of CBRE’s annual Trends in the Hotel Industry survey and analysis of a sample of 1,456 properties. These are the properties that reported both the provision for doubtful accounts and credit card commission payments categories each year from 2010 to 2017.
According to the report, a 4.7 percent compound annual increase (CAGR) was recorded in Total Operating Revenue from 2010 through 2017. Along with this, the amount set aside for doubtful accounts increased at a CAGR of 10.8 percent.
Over this eight-year period, the provision for doubtful accounts averaged just 0.047 percent of total operating revenue per year. The year 2017 recorded the highest ratio with 0.063 percent.
Credit card commission payments revenue also increased at a greater pace than the past eight years.
From 2010 to 2017, credit card commission payments increased with a CAGR of 5.5 percent and credit card commission as a percent of total operating revenue has grown for a low of 2.2 percent to 2.33 percent.
Through these years, CBRE estimates that 83.7 percent of total operating revenue at the hotels in the survey sample was charged to credit cards. The highest usage for credit cards was in 2015 with 85 percent while the lowest was in 2017 with 80.1 percent.
Credit card usage was highest at extended-stay hotels in 2017 with 93.5 percent while resorts with 63.6 percent had the lowest levels.
The research finds a disconnect while comparing the provision for doubtful accounts and credit card commission payments.
“It is reasonable to assume that a higher of the level of credit card use should result in a decline in the ability to collect. Therefore, the increased use of credit cards over the past eight years should have resulted in a reduction in the provision for doubtful accounts,” Mandelbaum said.
Read more about hotel issues with credit cards here.