REPORT FROM NORTH DAKOTA—While most U.S. hotel markets are slashing their outlooks on future gains, one market is exploding through every single one of its projections. Historically this market never sustained much pull in the hotel industry and is comprised of an entire state.
Any guesses?
North Dakota! That’s right, the state with such exciting derivatives as Lawrence Welk and Peggy Lee enjoyed an average occupancy rate of 85.3% this past July along with an unemployment rate of just 3.3%. North Dakota represents the biggest boom state of the 21st century. Between 2010 and 2011, it experienced a population surge of 4.7% (well above the national .6%) that shocked the market, which has been in a constant state of depopulation for several decades.
At a glance: since 2001
Hotel room supply across North Dakota grew 20% since 2000 and demand crushed it at a jet speed of 45.7%! At the same time, the national average for supply growth was 12.7% and demand, a staggering 11.6%. North Dakota experienced a blip during 2005, when its demand fell slightly during most months, only to enter a roller coaster 2006 and balance out for a stellar 2007 and beyond.
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At a glance: since 2007
Incredibly, North Dakota’s average demand growth since 2007 has been 22.6% compared to the national 2.2% average. Hotel room supply for the oil-rich state continued to grow behind its demand growth at 10.6%, but above the national supply growth of 7.8%. From January 2007 forward, North Dakota only experienced three months of slight revenue per available room decreases and other months, as much as a 29% to 35% RevPAR increase!
At a glance: July YTD 2011
Since the beginning of the year, North Dakota’s demand has grown by 10% and its supply by 2.8%, continuing to beat the national average; this time by nearly double at both (national supply growth: .8%; national demand growth: 5.4%). Its RevPAR reached a new historical peak of US$60.76—a whopping US$11.64 boost from July YTD 2010! In fact, the average monthly percent change in revenue for the North Dakota market is 27.2%.
North Dakota at Large
North Dakota’s hotel “vitals” are strong enough to race the Tour de France, but the spike in visitors and inhabitants is creating serious problems for the state. The boom in extracting oil from the Bakken oil field, which spans multiple Midwest states, has caused the homeless rate in North Dakota to skyrocket. Put in a peculiar position, many newcomers are finding themselves with full pockets, but forced to live in their cars, tents, strangers’ basements and distant motel rooms because of a severe lack of housing and hotel rooms. Many hotels are renting by the month instead of the night, with waiting lists for vacancies; and many urban hotels are currently booked months out, leaving the rural hotels bracing for full capacity by the end of this year. For a change, it’s the growth forecasts that can’t seem to keep up with the North Dakota market. Considering that the Williston, North Dakota, basin alone is currently producing 450,000 barrels of oil per day and is expected to grow to 1.2 million barrels per day within four years, it does not seem that this market is likely to take a nose dive any time soon.