Hotel Online  Special Report

 Resort Hotels
Wanted: Eaters, Golfers, and Shoppers
by Robert Mandelbaum, June 2006

From a management perspective, resort hotels are a unique form of lodging.  Multiple restaurants, lounges, retail stores, and recreational outlets make resort properties more complex to operate than the average transient hotel.  Due to their relative dependence on the discretionary expenditures of leisure travelers, and incentive-oriented group meeting attendees, resort properties can be extra sensitive to shifts in the economy.  In addition, resorts are frequently located in remote locations that present exceptional challenges in terms of supply deliveries, utilities, transportation, and weather.

Because of these unique factors, resort owners and operators need to analyze their operations using some “non-traditional” industry measurements.  Occupancy, ADR, and RevPAR are still important statistics, but they have limitations when benchmarking the performance of a resort hotel.  Seasonality could limit the annual occupancy rate of a resort thus making comparisons to other hotels less meaningful.  The dependence of resorts on “other” revenue sources (food and beverage, golf, spa, tennis, etc…) emphasizes the importance of guest counts as opposed to just occupied rooms.  Therefore, total revenue per guest is just as insightful to a resort hotelier as ADR is to a limited-service manager.

To provide resort managers with some of these critical performance measurements, we have analyzed data from the financial statements of 199 resort hotels for the period 1995 through 2004.  We also prepared estimates of 2005 performance for these properties based on a preliminary sample of 2005 data.  The resorts in the sample averaged 366 rooms in size, with an estimated occupancy of 70.6 percent and an average daily rate of $194.84 in 2005.  Rooms revenue comprised just over half (53.7 percent) of the total revenue at these resorts.  The data comes from the Trends in the Hotel Industry database of PKF Hospitality Research.

Relative Growth

The compound annual growth (CAGR) of revenues, expenses, and profits  of resort hotels from 1995 to 2005 was very similar to the average CAGR for the overall lodging industry.

For the period 1995 through 2005, we estimate that resort hotels achieved a 3.4 percent CAGR in total revenue.  This compares favorably to a 3.3 percent average growth rate for all hotels.  However, when looking at the CAGR for just rooms revenue, differences were found.  The rooms revenue for all hotels also grew at a 3.3 percent pace, while the CAGR for resort properties was 3.1 percent.  Based on this disparity, it is clear that other revenue sources had a greater influence on the growth of total revenue for resort hotels, as opposed to rooms revenue.

Expenses for both the all hotels sample, as well as resort hotels, grew at a CAGR of 3.2 percent from 1995 through 2005.  However, profit growth increased at a greater annual pace for resort hotels (4.1 percent) compared to the aggregate for all other property types (3.6 percent).  Once again, it appears that the relatively profitable revenue derived from the other operated departments had a positive impact on the bottom lines of the resort properties.

When we analyze these data on a year-to-year basis, we find some differences in how the resort segment responded to the boom times of the late 1990s, as well as the 2001 through 2003 recession.  On a year-to-year basis, we see that revenue and profit growth for resort hotels is somewhat more volatile than industry-wide averages.  Somewhat unexpectedly, we observe that changes in both revenue and profits for our resort sample lagged behind industry averages during the prosperous late 1990s.  However, during the recession from 2001 through 2003, resort hotels appear to have suffered less severe declines in revenue and profitability.  In turn, resort hotels lead the growth of other property types during the initial stages of the recovery in 2004, but lagged in 2005.

Guests Count

From 1995 through 2005, the number of rooms occupied in our resort sample grew at a CAGR of 0.2 percent.  During this same period, the number of guests accommodated at these properties grew at a CAGR of 1.1 percent.  On average, the number of guests per occupied room went from 1.59 in 1995 to an estimated 1.73 in 2005.

When comparing the annual growth rates for revenue, occupied rooms, and number of guests, we find changes in revenue and guests counts to be more in sync than changes in revenue and occupied rooms.  Prior to 2004, the greatest increases in revenue occurred concurrently with significant increases in guest counts.  Conversely, the biggest declines in revenue occurred when these properties experienced large drops in their guest counts.

The influence of guest counts on revenue versus rooms occupied appears to have differed during the 1990s, as opposed to the current recovery period.  In the years 1996, 1998, and 1999, the number of rooms occupied at resort hotels declined, while the guest counts grew.  During all three of these years, total revenue was able to grow despite declining occupancy.  On the other hand, revenue recovery for resort properties in 2004 and 2005 appears to be driven more by gains in occupancy, as opposed to guest counts.

Other = More

Earlier we described how, in aggregate, the increase in food, beverage, retail, and recreation revenues exceeded the growth of rooms revenue for the period 1995 through 2005.  This resulted in rooms revenue comprising 55.4 percent of total revenue for resort hotels in 1995 compared to just 53.7 percent in 2005.

On an annual basis, other revenues grew faster than rooms revenue each year from 1996 through 2000.  However, coming out of the recent recession, it appears that rooms revenue has lead the recovery.  In 2004 and 2005, the annual gains in rooms revenue have been greater than the annual growth rates for other revenue.

Based on both the “other revenue” and “guest count” analyses, resort managers appear to be forced to simply sell more rooms to bring their properties back during periods of recovery.  However, during periods of prosperous industry-wide performance, resort managers can concentrate on a combination of increasing guest counts and boosting per guest expenditures for food, beverage, retail, and recreation.

Comparative Performance Resort Hotels vs Industry Average
Compound Annual Growth 1995 – 2005 EST
U.S. Resort Hotels Occupied Rooms, Guests, and Revenue
Annual Change
U.S. Resort Hotels Rooms Revenue vs. Other Revenue
Annual Change
U.S. Resort Hotels Total Revenue and Profit* Dollars
Per Guest Day
Source: PKF Hospitality Research
PKF Hospitality Research foresees the continued emergence of the U.S. lodging industry from recovery and approaching the top of the current business cycle.  This should allow for several years of sustained performance at, or above, long-term industry averages.  Given this operating environment, we expect to see resort managers once again rely on increased guest counts and other revenue sources as their method to improve revenues and profits.

Robert Mandelbaum is the Director of Research Information Services for PKF Hospitality Research.  He is located in the firm’s Atlanta office.


Robert Mandelbaum
Director of Research Information Services
PKF Hospitality Research
3475 Lenox Road, Suite 720
Atlanta, GA 30326
Phone: (404) 842-1150, ext 223
Fax: (404) 842-1165

Also See: Let Them Eat Cake: The Growing Contribution of Hotel Food and Beverage to the Bottom Line / Gregory J. Miller - PKF / April 2006
U.S. Hotels: Revenues and Profits Rise, But So Do Expenses / 2006 Trends in the Hotel Industry / May 2006

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