The availability of the latest 2020 population counts from the U.S. Census Bureau provides a prime opportunity to compare changes in state populations over the past decade with the growth in hotel room nights and determine if states with increasing populations also experienced increased economic activity and a corresponding increase in hotel development. Analyzing population growth and changes in hotel supply also gives developers insight on which states have seen above- or below-average population increases, pointing out potential opportunities as well as places to avoid.
Between 2010 and 2020, the U.S. population grew by 7.4%, from 309 million to 331 million people. At the same time, available hotel room nights increased 11.3%, from 1.8 billion to just under 2 billion annual room nights, indicating the U.S. hotel industry grew room supply about 50% faster than the population increased.
To pinpoint potential opportunities and pitfalls, we need to compare the growth in hotel room nights adjusted for the rate of population growth over the past decade. This requires some analytic gymnastics, but thanks to the extensive data available from STR, CoStar’s hospitality analytics firm, this can easily be done.
Comparing the 12-month sum of available room nights ending in December 2010 with the same sum ending in December 2020 establishes a rate of change for hotel room count for the decade while lessening the impact of seasonal hotel closures, which often happen in December.
To further minimize the impact of the widespread temporary closures in 2020 when almost 1 in 5 U.S. hotel rooms were temporarily shuttered, we used STR’s Total Room Inventory calculation, which omits temporarily closed rooms.
Deducting the total rate of population growth from the rate of hotel room supply increases, we arrive at a metric for hotel room nights adjusted for population growth. For the nation, this value is 3.8%, meaning on average the number of available hotel rooms increased 3.8% faster than the population.
A more nuanced picture emerges when we look at states individually. The state with the highest population increase over the past 10 years is Utah with an 18.4% rise. The hotel supply growth rate matches the state's population growth rate exactly, so the adjusted supply change is zero. Idaho registered the second-largest rate of population growth with a 17.3% increase over the past decade. However, room nights only increased 12%, resulting in a change in available room nights adjusted for population of more than -5%.
The state with the largest percentage increase in hotel room nights is North Dakota. The state's population grew 15%, but room nights increased 58% as oil and gas production ebbed and flowed with the price of oil and hotels added supply to house the fluctuating workforce. Other states with high hotel room supply growth rates adjusted for population are New York with 21%, Oklahoma with 20% and Louisiana at 16%. Hotel developers in these states will need to be aware of the increased competition in their chosen markets.
There are 13 states where the population growth rate exceeded the rate of available hotel room nights. Those states may be more attractive to developers going forward, including Nevada, which saw its population increase by around 15%, but room supply at the end of 2020 was basically the same as a decade earlier, increasing just 0.2%. Also, Hawaii posted a population increase of 7%, but hotel room supply decreased -1.2%. Hawaii was the only state where rooms were taken out of inventory over the decade.
Other states where hotel supply did not keep pace with population growth are Arizona with 12% population growth but only 5.5 supply growth and Virginia where room nights increased 2.4%, but the population grew nearly 8%.
Three states shed population over the last decade: West Virginia, Mississippi and Illinois. The declines in Illinois and Mississippi were barely noticeable and room night growth remained positive in all three states, so despite the population trends, developers found markets and street corners where they felt that a new hotel would create value. It will be interesting to see how hotel supply changes in these three markets over the current decade.
The three states with the largest populations, California, Texas and Florida, showed vastly different relationships between the growth rates for population and available hotel room nights. In California, room supply grew 6.6%, which was in line with the population growth of 6.1%, while in Texas, population jumped 16%, but the room night growth was even stronger at 24%.
In Florida, the healthy room night increase of just under 11% did not keep pace with the population influx of 14.6%. The double-digit room growth rates in Florida and Texas point to continued strong developer interest in these Sun Belt states, which isn’t likely to ebb in the coming years.
Overall, the combination of population growth and supply growth points to an industry in flux. Population growth does drive available room night growth, but growth rates can vary substantially. It behooves developers to understand state- and market-specific population shifts to understand where the opportunities are, or more importantly, where they will be.