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Resorts Are Recovering

By Robert Mandelbaum and Caroline Robichaud
May 14, 2013

Conventional wisdom says that high-end resort hotels should be particularly vulnerable to economic recessions because of the discretionary nature of the expenditure.  A review of upper-tier resort performance during the recent Great Recession found that these properties did suffer more than the average U.S. hotel in 2008 and 2009.  Since then, however, we have observed a very strong bounce back in resort occupancy levels, which should allow for significant increases in average daily room rates (ADR) going forward.

To better understand the market performance of U.S. destination resort hotels, PKF Hospitality Research, LLC (PKF-HR) analyzed a series of Class C Resort data provided by Smith Travel Research (STR).  STR defines Class C Resorts as “a Destination Resort with a full scale of facilities to attract and retain vacationers.”  In 2012, this sample of 307 Class C Resorts averaged 501 rooms in size, and achieved an occupancy of 65.3 percent and an ADR of $175.74.  Using PKF-HR’s Hotel Horizons® econometric forecasting model we then prepared projections of the future performance of this class of hotels for the years 2013 through 2017.

Market Performance
According to data from STR, the long run average (LRA) occupancy level among Class C Resorts from 1998 through 2012 is 66.6 percent.  The LRA change in ADR during the same period is an annual increase of 3.5 percent, yielding a LRA RevPAR increase of 3.5 percent annually.  Peak occupancy among Class C Resorts during the past ten years was achieved in 2007 at a level of 67.1 percent, slightly above the LRA.

Accommodated demand, as measured by the number of occupied rooms, decreased 5.0 percent in 2008 and 8.9 percent in 2009 as the Great Recession crippled travel, particularly in both the leisure and group meeting market segments.  Similar to other hotels across the U.S., the demand for Class C Resorts began to recover in 2010 and has grown at a compound annual rate of 3.6 percent through 2012.  Year-end 2012 occupancy was 65.3 percent, slightly below the LRA occupancy level of 66.6 percent.

Peak ADR in the last ten years among the sample of Class C Resorts was $183.40 in 2008.  Again, most hotels across the country saw decreases in ADR in 2009 and into 2010, and the resort segment was no exception.  ADR declined 10.5 percent in 2009 and 2.5 percent in 2010 before seeing increases of 4.4 percent and 4.5 percent in 2011 and 2012, respectively.

These changes in occupancy and ADR resulted in significant swings in RevPAR, with the largest decrease occurring in 2009 at a rate of negative 18.4 percent.  Since then, however, RevPAR has increased at or above the LRA annual rate of change.  RevPAR for the sample of Class C Resorts was $114.76 in 2012, still roundly $9.00 below the previous peak RevPAR of $123.55 in 2007.

Luxury And Income
The PKF-HR Hotel Horizons® model evaluates the influence of several economic variables on changes in lodging supply, demand, and pricing.  Our analysis has found that upper-tier properties benefit most from growth in income, while the lower-tier hotels are dependent on growth in employment.

Since the depths of the Great Recession in 2009, personal income has recovered to pre-recession levels.  Unfortunately employment recovery is forecast to lag until 2015.  With personal income leading the slow economic comeback, luxury and upper-upscale hotels have recovered at a quicker pace than properties in the more moderately priced chain-scales.

As one would expect given the Class C Resort average ADR of $175.74 in 2012, the vast majority of properties in the sample are positioned in the upper-upscale and luxury chain-scale segments.  Therefore, a significant driver of the recent strong performance of these high-end resorts has been the rising income levels of the relatively wealthy individuals that patronize these properties.

Market Forecast
Moody’s Analytics, the source of economic data for PKF-HR, forecasts persistent growth in personal income over the next five years.  Therefore, we project that the occupancy for Class C Resorts will continue to grow and exceed the LRA of 66.6 percent each year from 2013 through 2017.

Having surpassed the LRA occupancy level, the U.S. resort market is reaching the point the business cycle where market conditions should allow managers to raise room rates significantly.  PKF-HR forecasts that room rates will increase at a compound annual growth rate (CAGR) of 5.7 percent from 2013 through 2017.  Driven predominantly by gains in ADR, Class C Resort RevPAR is projected to increase at a CAGR of 6.8 percent over the next five years.

After suffering greatly during the initial stages of the recession, destination resort hotel owners and operators can now begin to relax and grab a drink by the pool.  Increases in personal income and corporate profits have helped preserve the travel budgets for high income individuals and business groups, two of the largest sources of demand for high-end destination resorts.  This has contributed to the recovery in revenue.

Robert Mandelbaum is the Director of Research Information Services with PKF Hospitality Research, LLC.  Caroline Robichaud is a Senior Consultant in the Atlanta office of PKF Consulting USA, LLC.  To purchase a copy of the four page Destination Resort forecast report, please visit  This article was published in the April 2013 issue of Lodging.


Robert Mandelbaum
Director of Research Information Services
PKF Hospitality Research
3475 Lenox Road
Suite 720
Atlanta, GA  30326
Off  404 842 1150, ext 223
Dir 404 809 3959
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