NASHVILLE, Tennessee–There’s more to the U.S. hotel industry than the top 25 markets, even if those top markets cast the largest shadows.
Steve Hood, senior VP of research for STR and the founding director of the SHARE Center, gave attendees of this year’s Hotel Data Conference the opportunity to learn about what’s going on with the metro and non-metro markets in markets Nos. 26 and beyond during a breakout session titled “Beyond the top 25.” (STR is parent company of Hotel News Now.)
STR tracks 163 markets in the United States, 93 of which are categorized as “metro,” which comprise large- and medium-sized cities (including the top 25 markets). The remaining 70 are categorized as “non-metro,” which includes rural areas outside of major cities.
All numbers and statistics are year-over-year data as of July 2015.
1. Metro leads in growth
“The top 25 led us out of the recovery,” Hood said. “Now we’re seeing the cycle changing.”
Metro markets not included in the top 25 led in occupancy growth at 3.6%. Both the top 25 markets and the non-metro markets recorded occupancy
growth of 3%.
The metro markets also outpaced the top 25 and non-metro in average daily rate at 5.3% against 5.1% and 3.7%, respectively, he added.
The same is true for revenue per available room, where metro led the way with a 9.1% gain compared to non-metro at 6.8% and the top 25 at 8.2%.
2. The top 25 still on top for actuals
Even though metro markets saw greater growth percentages than the other two groupings, the top 25 markets claimed the top spot in actual occupancy, ADR and RevPAR.
“Occupancy is pretty stratified with the top 25 at 73%, metro at 65% and non-metro at 58%,” Hood said.
The top 25 markets also had a lead over the other two markets for ADR at $144, while metro came in at $107 and non-metro at $99.
In terms of RevPAR, the top 25 was at the top again with $105. Metro came in with $70 non-metro with $58.
3. San Jose leads metro market performance
The San Jose/Santa Cruz area of California reported the largest increase in RevPAR (+19.1%) among metro markets during July, Hood said.
Driving much of that gain was the 14.3% increase in ADR, which also led all markets.
Coming in at second place was the Melbourne/Titusville area of Florida. While the market ranked 48th in supply and 66th in active pipeline, it ranked sixth in both ADR growth and occupancy growth.
“This could be a place of opportunity for the future,” Hood said. “There’s not much supply recently, and there’s not much planned, but there’s healthy occupancy and ADR numbers.”
4. Metro and non-metro markets close in construction, pipeline numbers
The top 25 markets claimed about half of the rooms under construction and in the active pipeline, Hood said. Metro and non-metro each make up roughly a quarter of the remaining projects.
The metro markets excluding the top 25 had more rooms under construction as of July (37,318 rooms) than non-metro markets (33,703 rooms). Conversely, non-metro markets had a slight edge over metro in the active pipeline, with 123,573 rooms to 122,648 rooms, respectively.
The top 25 markets had 57,713 rooms under construction and another 179,822 in the active pipeline as of July.
5. Non-metro markets see increases in supply, also demand in oil-rich areas
Oil demand is driving hotel fundamentals in many non-metro markets, Hood said.
North Dakota (the entire state is categorized as a “non-metro” market by STR) tops the supply percentage change at 7.9% and ties for second with Georgia North for demand change at 7.4%. Nebraska holds first place in demand change at 8.9%.
Texas West places second in supply percentage change at 5.3% and 10th in demand change at 6.1%. Texas South places third in supply at 5.2% and fourth in demand at 7.3%.
Though it ties for fourth with Oklahoma in supply change at 4.1%, New Mexico South doesn’t place in the top 15 for demand.
Maryland (not including Baltimore), a nonwestern outlier in the top five for demand change, saw a supply increase of 7.3%.