Analysts are blaming the January RevPAR slowdown on the weather. We remain more concerned with the shock of potentially negative RevPAR growth in June/July.
January RevPAR growth in the Upper Upscale segment has only averaged +3.5% YoY, versus 10% and 5% in November and December, respectively. Usually, we see the weather excuse used by retail and restaurant companies but give the analysts a pass. Besides, we are less concerned with YoY comps given the wild volatility in RevPAR over the past three years. Rather, we prefer to track RevPAR on a sequential, absolute dollar basis, adjusted for monthly seasonality.
Through this lens, we saw a major spike in RevPAR during the spring and early summer of 2010 – pent up demand in our view – followed by a drop off in August/September and stagnancy through the rest of the year. Of course, the YoY comps told a different story. 2010 RevPAR ended up almost 6%. But as shown below starting in August 2010, RevPAR has either been underperforming or slightly above depressed seasonal expectations.
The analysts not focused on dollar RevPAR will be shocked when there is a marked slowdown in RevPAR growth post the February peak. In fact, RevPAR was so strong in June and July that we could actually see RevPAR go negative, assuming there is not a meaningful sequential pick up.
If we are right, the slowing comps will have negative earnings ramifications relative to Street Q2 and Q3 estimates. Of course, if January’s significant slowdown is related to anything more than just weather, the downside will be that much more severe.