Connecting the Dots: Explaining RevPAR

by Rich Luna

Editor’s Note: Connecting the Dots is a series of monthly conversations with Michael Dominguez, FASAE, CHSE , President and CEO of Associated Luxury Hotels International (ALHI) . The series examines issues in the global economy that will “connect the dots” to be helpful not only in business but in life as well. This installment is moderated by Ashly Balding , Executive Vice President & Chief Sales Officer at ALHI.??

Ashly Balding: Welcome. So, RevPAR (revenue per available room) we know that it's slowing. How are you looking at this for (2025)??

Michael Dominguez: You said it perfectly though. It's slowing. I think that's important because the rate of growth is slowing down, but growth is still the key point. We know we came out of the pandemic like a shooting star. The problem with that is that we were never going to maintain that rate of growth. So, the normalization we're seeing is, I think, really good for our industry. It's healthy for our industry. We're seeing still a lot of compression, but I think it's important for everyone to really take away that the overall RevPAR is slowing down. But there is a huge bifurcation between the economy and midscale and luxury and upper upscale hotels, and you're finding that we still have a luxury shopper and a luxury buyer that is still very sophisticated and still very experiential driven, and that is really healthy for the luxury market, specifically for ALHI, with us only playing in the luxury set. That is still really, really healthy for us. Incentives are back in a big way. Financial insurance is back in a big way. So overall, I'm pretty optimistic and pretty bullish on where we're headed for the year. You can see the markets have taken off now that we've gotten through an election. I think everybody was just ready for it to be over and now you're starting to see some movement. Overall, I'm pretty excited about where we're headed.?

Ashly Balding: Any other trends you can highlight??

Dominguez: There's a few that you're seeing right now that the second-tier cities are behaving like first-tier cities, and that's a surprise for people. What I mean by that is they're full, and if they have availability, they're expensive. That's actually a good sign for the health of our industry. What's complicating it right now, Ashli, is that, we have some major inventory down specifically in the Southeast. When you think about the Austin Convention Center is about to close for the next three years as they blow that up and completely rebuild it, that is taking out a big chunk of inventory where we don't have enough space already. And then you have the Dallas Convention Center going through an expansion and renovation, which means they're moving groups out over the next two to three years. That is really complicating an area that's already compressed, because they got moved across the country into other areas, and we're already busy, and it just compressed it a little bit more. I saw an article that talked about we are exploding with renovations and conversion. So, what's a conversion? Moving an office building into a hotel. We're going to convert that. You see a lot of that happening right now. But when you're talking about major renovations and overhauls, it is taking inventory out of market as well at the same time. Really healthy for us for the next few years, but right now it's going to complicate things, and the one thing I've advised everybody, specifically if you’re a hotelier and even with planners, but ’25-‘26, we're going to stay very compressed. Space is going to be an issue. What I would be mentioning is moving forward, it gets interesting when you get to late ‘27, early ‘28, you have these renovations done of these convention centers. If you look at the pipeline of construction, it's starting to finally pick up. It's like everything's going to come to a head in ‘28. If you're a supplier, if you're a hotelier and you're looking at the future with the same aggressiveness that you have today, you may actually lose some of your pace in your backlog because there's going to be more competition down the road. I just think it's something that we should all keep an eye on.?