Hotel Recovery: Rates and Occupancy Up
By Margo McCall -- Tradeshow Week, 1/9/2006
The hotel industry rebound remains in full swing, with occupancy and revenue numbers all higher. After weathering several down years, the burst of renewed activity is welcome news for hoteliers, but what are the implications for event organizers?
According to PricewaterhouseCoopers, these are good times for the hotel industry. The average occupancy level at U.S. lodging establishments rose to 64.7 percent as of last October, up from 61.3 percent in 2004 and 59.2 percent in 2003. The average daily rate, or ADR, was $90.85 as of October, up 5 percent over 2003 levels.
PwC reported 7.7-percent growth in 2005 revenue per available room, or RevPAR, the second-highest rate since 2004. Although hotels in all top 25 markets are experiencing positive growth, it is most pronounced in Atlanta, Chicago, Dallas, Los Angeles, Miami, New York and San Francisco.
Sue Trizila, CEO of housing provider Wyndham Jade, said she's heard few client complaints about higher room-block rates. "We understand that prices have to go up. The most important question is, 'Are they fair?' I don't think anyone begrudges the hotel industry for having to raise prices," she said.
The acceptance of higher prices stems in part from the special relationship between hotels and convention organizers. Hotels rely on citywide conventions to help fill midweek rooms. Conventions were among the first segments to rebound following the post-Sept. 11 travel slump. In addition, event organizers rely on hotels to provide favorable room rates that help draw attendees.
"Hotels are critical partners. We want it to be good for them too," Trizila said.
Hotel room rates caused some sticker shock last year in New York, where condo conversions are making a dint in supply. NYC & Co., the city's convention and visitors bureau, reported an 87-percent summer occupancy level, up from 84 percent the previous year.
As of midyear, the average New York rate of $216 was up 14 percent from the previous year. Extra supply could help ease the rate hikes, however. According to NYC & Co., by the end of 2007, another 5,000 rooms will be added to the city's supply of more than 70,000.
PwC forecasts that overall occupancy will increase to 64.3 percent in 2006 and ADR will rise by 5 percent. Furthermore, the research consultancy warned, the ADR increases will be highest in the luxury and upscale segments used by most meeting planners.
The American Express business travel monitor reported third-quarter international room rates of $217, up from $204 in the year-ago period. In the United States, rates of $131 were up $1 over the same period of last year.
Kerry Wages, executive vice president of convention operations for Wyndham Jade, said there are still opportunities to negotiate favorable rates for high-volume business. "Most of the major chains appreciate the importance of large blocks and price them accordingly," he said.
This year will also see the continued recovery of New Orleans and Gulf Coast hotels hit by Hurricane Katrina. Although relief workers are helping fill New Orleans hotels, convention business won't return until after the Ernest N. Morial Convention Center reopens in April. The hurricanes also shifted a number of conventions to other cities.
In addition, this year will see staggered contract expirations for unionized hotel workers in Boston, Chicago, Honolulu, Los Angeles, New York, Toronto, and Monterey and Sacramento, Calif. About 4,000 San Francisco members of Unite Here remain without a contract, amid a long-running boycott that has resulted in the loss of more than a half-dozen meetings.
