West Coast Outperforms its East Coast Brethren in RevPar Growth

US RevPAR growth posted a weekly gain of 3.3%

Smith Travel Research recently released its weekly results for RevPAR and other key lodging trends. And according to RBC Capital Markets ‘ Wes Golladay , which analyzed the data, the key takeaways are as follows: 1. US RevPAR growth posted a weekly gain of 3.3%, bringing RevPAR growth for the 28-day average to 4.4%. This marks the highest 28-day RevPAR growth reading year-to-date. RevPAR growth in both periods was driven by rate (ADR) at 3.5% and 3.7% in the week and 28-day period. Demand exceeded supply over the 28-day period with occupancy up a healthy 70bps. 2. The West Coast outperformed its East Coast brethren by 410bps and 250bps over the week and 28-day periods, respectively. Strength in the West was driven by Phoenix (14.8%), San Francisco (13.7%) and Los Angeles (8.9%) over the 28-day period. The East Coast was pulled down by weak performances in NYC (-5.8%), Minneapolis (-4.0%) and Boston (-3.7%). 3. From an intra-market perspective, supply continues to pressure urban markets which underperformed the industry by 210bps for the 28-day period, while resort and suburban locations continue to be bright spots up 6.7% and 5.5%, respectively, Golladay says. “We believe the strength in resort and suburban segments is due to underlying strength in the US consumer, highlighted by strong retail sales data and year-to-date highs in consumer sentiment. Importantly, our thesis of volatile urban market performance continues to play out as seemingly strong group activity drove outperformance in the urban markets and luxury/upper scale segments in the current week.” 4. From a REIT standpoint, based on STR data quarter-to-date, RBC would expect the geographic footprints of PEB and INN to show outperformance in 2Q16. 5. “We reiterate our view that RevPAR comps should get easier when looking to the second half of 2016 with average RevPAR in 1H15 of 7.0% vs. 2H15 at 5.2%. Moreover, while we are not forecasting meaningful acceleration in RevPAR growth, we believe the strength of the US consumer and a favorable group calendar for the rest of June and 3Q16 should be provide a base for RevPAR results over the coming months.”