Hotel segments and the laws of economics

The opportunity to examine hundreds of hotel markets and thousands of competitive sets because of joining STR Analytics, we have observed that the hotel industry operates some counter to other sectors of the economy.

During a severe economic recession, most of industries find products which cater to the budget-conscious lose less or even increase demand relative to those that appeal to the luxury segment. But STR data indicates the opposite occurs in the hotel industry.

In other industries, customers continue or even increase demand for products offered by the likes of McDonalds, Wal-Mart and Hyundai, while Ruth’s Chris, Neiman Marcus and Cadillac suffer lower demand than ever. But in the hotel world, the economy and luxury segments both lost 8.8% in occupancy from 2008 to 2009 based on the 2009 year-end results. Something inverted is going on here.