U.S. HOTELS GENERATED more revenue than ever in 2017, but their actual profits declined as expenses grew, reports STR.
“The industry reached a milestone by exceeding $200 billion in total revenue last year,” said Joseph Rael, STR’s director of financial performance. At the same time, he said, “expenses grew at a higher rate for the second year in a row. As a result, profit margins have declined somewhat.”
The company’s 2018 HOST Almanac released today reveals U.S. hotel industry revenues topped an estimated $208 billion in 2017, an increase of $10 billion over 2016.
Total revenue and a total industrywide house profit of $77 billion were each an all-time high for the industry.
STR’s HOST or hotel operating statistics, a profit-and-loss-tracking program, analyzed same-store growth rates for the more than 5,200 U.S. hotels for 2017 and 2016. The program charted a 1 percent increase in gross operating profits and 1.9 percent growth in total revenue.
Full-service hotels grew house profit 1.4 percent, while limited-service properties saw a slight profit decline of 0.2 percent compared to 2016. Among the class segments, luxury hotels achieved the greatest profit increase, up 3.1 percent, while upscale and upper midscale both reported a 0.3 percent profit decline.
For the fourth year in a row, miscellaneous income led all revenue departments with 8.8 percent growth. According to Rael, this demonstrates the recent industrywide emphasis on fee-based income.
Last year, franchise fees, management fees and property taxes represented some of the largest expense increases, with all three each exceeding 4 percent. Utility expenses increased 1.3 percent after two consecutive years of decline. Total labor costs grew 3.2 percent, which was below the 4 percent growth levels of 2016 and 2015, but higher than revenue growth for the second straight year.
New to this year’s HOST program, STR developed a model for industry profitability that covered all U.S. hotels. This provided estimated industrywide departmental revenues and expenses as well as individual segments and markets.
Based on the model, STR estimated total U.S. F&B revenues of $38 billion, other department revenues of $7 billion and miscellaneous income of $6 billion.