October 28, 2024, by Chris Plasencia, Managing Director
How do a hotel’s Occupancy, ADR, and RevPAR compare to its competitive set?
How has the property’s market share trended recently?
A hotel’s competitive positioning relative to its peers is a primary factor in evaluating its performance. The most straightforward comparison is to a hotel’s competitive set through monthly and weekly STR Reports, and it’s crucial to first confirm that the set is actually comprised of hotels that compete with the subject property. Does it include overly ambitious comparisons that justify underperformance? Or does it deliberately include less competitive hotels to inflate the subject hotel’s standing?
With that baseline set, the key is to assess whether the hotel’s performance is consistent with expectations. For example, it’s not unreasonable for a 1980s-era full-service hotel in need of a renovation to run an 80% ADR index against a set that is top-heavy with newer competitors. On the other hand, a select-service hotel in a rate-elastic submarket should run at Occupancy parity with peers in a comparable physical condition. To a large extent, brands also dictate a natural ranking within a set as well, with premium-branded hotels typically rising to the top, at least on an ADR and RevPAR basis.
Looking at trends in performance over time is also illustrative. As a property ages, it makes sense that its ADR, RevPAR, and respective ADR and RevPAR indices may decline until a renovation takes place, at which point those metrics should spike. If a hotel that has historically ranked at the top of its set, with a RevPAR index traditionally well over 100%, falls precipitously, something is wrong. Similar scrutiny should be paid to ensure Occupancy and ADR indices remain balanced over time to maximize the hotel’s profitability.
The level of scrutiny can be as extensive as needed, and there are numerous analyses that can be done to ensure a property is firing on all cylinders. Call on us to discuss the sort of analyses we can provide to ensure your asset is performing where it should be, thus maximizing its value.
For a complete list of recommended points of analysis that we recommend all owners of hospitality assets be aware of, click through to our guide to Questions Hospitality Owners Should Be Asking. Stay tuned as we dive deeper into these questions and provide you with actionable steps you can take to preserve and enhance the value of your hotel and resort investments.
The Plasencia Group team is expertly skilled and experienced in maximizing hospitality asset values. Let us put our decades of invaluable knowledge to work for your hotel or suite of hospitality assets. Call us directly at (813) 932-1234 to start a conversation with one of our Owner Representation specialists and explore a myriad of opportunities to enhance the value of your hospitality asset.
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