CBRE Finds U.S. Hotels Enjoy Profit Growth, But It Is Becoming Harder To Achieve

J. Mark Woodworth

Atlanta, GA,  April 29, 2019 – While U.S. hoteliers enjoyed a ninth consecutive year of increasing profits in 2018, it is becoming increasingly difficult for managers to accomplish this task. 

 According to the recently released 2019 edition of Trends^® in the Hotel Industry by CBRE Hotels Americas Research, total operating revenue increased by 2.6 percent in 2018 for the average hotel in its survey sample. 

Managers were able to limit the growth in operating expenses to 2.8 percent, thus allowing for a 2.3 percent increase in gross operating profits (GOP) at the Trends^® properties. 

The 2.8 percent growth in expenses is less than the long-run average of 4.0 percent over the past 40 years.  However, it is greater than the 1.8 percent average annual growth rate achieved the past two years.

John B. Corgel

“With revenue growth forecast to slow down in the foreseeable future, owners and operators are beginning to wonder how much more juice is left to squeeze out of their operations,” said R. Mark Woodworth, senior managing director of CBRE Hotels Americas Research. 

“2018 marked the first year since 2009 that expense growth exceeded revenue growth, thus resulting in a slight decline in the GOP margin. 

" This is indicative of the struggle managers are having sustaining the effective cost controls that have been in place since the great recession.” 

 In 2018, 59.2 percent of the properties in the Trends^® survey sample achieved revenue gains, but only 54.3 percent realized GOP growth.

“Historically, at this point in the business cycle, we see ADR growth that really drives profits,” said John B. (Jack) Corgel, Ph.D., professor of real estate at the Cornell University School of Hotel Administration and senior advisor to CBRE Hotels Americas Research. 

“With ADR growth limited to 3.0 percent or less since 2016, we have seen a concurrent deceleration in the efficiency of the flow of top-line dollars to the bottom line.”

Trends^® in the Hotel Industry is the firm’s annual survey of operating statements from thousands of hotels across the nation.  The 2018 operating data collected for the 2019 survey was compiled in accordance with the 11^th edition of the Uniform System of Accounts for the Lodging Industry.

CONTACT:

Chris Daly

Daly Gray Public Relations

703 435 6293

chris@dalygray.com