Minnesota Lodging Performance through First Half of 2010
Release Date: Aug 13, 2010
This article and graphs are provided under permission granted by STR (Smith Travel Research, Inc.) – the source of the data.
The Minnesota and Minneapolis-St Paul hotel markets generally outperformed the U.S. and the 7-state West North Central (WNC) U.S. region over the first six months of 2010. Lodging performance has improved in most U.S. markets in recent months, providing cause for optimism. However, it is important to keep in mind that lodging performance comparisons typically consider year over year change for the time period under consideration, and lodging metrics were at or near recent historic lows during the relevant first six months of 2009.
Two sets of graphs are provided to illustrate changes in lodging performance through the 1st half of 2010 (i.e., year-to-date, or YTD). The first set of graphs shows change for 2010 YTD versus the same period of 2009 for Minnesota, Minnesota areas, the U.S. and the 7-state West North Central (WNC) U.S. region. Minnesota outperformed both the U.S. and the region on change for key measures of occupancy (MN +5.3%; U.S. +4.4%; WNC region +2.3%), revenue (MN +6.2%; U.S. +4.9%; WNC region +4.2%) and revenue per available room (i.e., RevPAR; MN +4.7%; U.S. +2.3%; WNC region +2.5%). Minnesota’s room demand (i.e., rooms sold) was up 6.8%, which was more than the WNC region (+4.0%) and similar to the U.S. (+7.0%). Room supply grew less for Minnesota (+1.4%) than for the U.S. (+2.5%), and at a similar rate to the region (1.6%). Average room rates, which have only begun to rebound within the last couple of months, declined 0.6% for Minnesota – a rate that was between the 2.0% decline for the U.S. and the slight increase of 0.2% for the region.
Lodging in the Minneapolis-St Paul MSA (i.e., "metro region"), including the three core market areas of Minneapolis, Bloomington and St Paul, outperformed the U.S., the WNC region and all other Minnesota areas on change in occupancy, revenue, RevPAR and demand. (The other two metro areas – the Minneapolis North and Minneapolis South areas – did not hold this same pattern.) Metro region room rates showed greater declines than other areas over the period, and metro areas varied considerably on supply change for the period, with three areas showing higher supply change and two areas showing lower supply change than the state overall. It is worth noting that, during the economic downturn, the Minneapolis-St metro lodging market was generally hit hard than greater Minnesota areas, so has further to climb to get back to pre-recession levels. It is interesting to note that the five greater Minnesota areas show a tight range of values for change in revenue (+2.9% to +4.7%), despite having considerably more variation in other metrics.
The second set of graphs illustrates changes in statewide lodging performance on a month-by-month basis through June 2010. Here, we gain the perspective of change over time but lose the perspective of different geographic areas of the state. A general pattern of increasing monthly levels of change can be seen for all metrics except for supply, which showed the opposite trend of decreasing levels of change. (Note: Due to the lengthy process required to plan and build lodging properties, it is common to see a substantial lag in adjustments of supply to match market conditions.) The first year-over-year monthly increase in average room rates did not occur until May 2010, despite increases in occupancy and demand that preceded this event by several months, extending back to late in 2009.
A quick rundown of Minnesota year-to-date (through 2nd quarter) measures for 2010 compared to year-to-date measures for 2009 helps illustrate what a difference a year can make. The 2009 numbers can be found on the "Minnesota" lines of the first set of attached graphs:
Year-to-date (YTD) MN occupancy change: 5.3% for 2010 (compared to 2009) versus -11.3% for 2009 (compared to 2008)
- YTD MN supply change: +1.4% for 2010 versus 2.9% for 2009
- YTD MN demand change: 6.8% for 2010 versus -8.7% for 2009
- YTD MN revenue change: 6.2% for 2010 versus -13.5% for 2009
- YTD MN room rate change: -0.6% for 2010 versus -5.2% for 2009
- YTD MN RevPAR change: 4.7% for 2010 versus -15.9% for 2009
Click below for accompanying graphs of Minnesota lodging performance (also linked to above):
Minnesota's Lodging Industry Performance, First Half 2010