2016 – A Year in Review for Hotel Industry Firms

The year 2016 has been yet another productive year for hotels in the United States. According to the August 2016 Smith Travel Research report, even though the August yearto-date occupancy for these lodging firms decreased 0.2% to 66.9%, relative to 67.0% for the same period in 2015, the August yearto-date average daily rate, grew 3.1% to US$124.18. The year-to-date average daily rate was US$120.45 for the same period in 2015, US$114.77 in 2014, US$110.35 in 2013, US$106.10 in 2012, US$101.70 in 2011, and US$98.06 in 2010. The August year-to-date revenue per available room (RevPAR) of these firms also increased by 2.9% to US$83.10 relative to US$80.74 during the same period in 2015. Per the latest IBISWorld Industry Report for Hotels & Motels in the United States, the industry revenue has shown “robust” growth during the recent 5-year period. The industry revenue for U.S. hotels and motels is expected to increase to US$169.2 billion in 2016 (yielding US$28.7 billion profits) at an average annual rate of 2.4%, relative to US$165.1 billion in 2015, US$159 billion in 2014, US $150.1 billion in 2013, US$143.7 billion in 2012, US$137.6.44 billion in 2011, and US $130.9 billion in 2010. Figure 1 summarizes the rising trend of revenues in this industry from 2000 to 2016. Hotel industry investors, however, seem to be cautious. On an average, hotel industry stocks continue to underperform the market, leading to negative market premiums. Table 1 summarizes the 2016 stock returns of key hotel industry firms from lodging and hotel-motel real estate investment trust sectors. The JHFM Index for hotel industry stocks continue to yield negative market premiums, suggesting investor skepticism in these stocks on an average. The JHFM Index is a marketcapitalization weighted index maintained by JHFM. It is a two-part index measuring the