By Vail R. Brown
VP, Global Sales & Marketing, STR
HENDERSONVILLE, Tennessee—It is that time of year when many Americans pack up the car and head to visit friends and family for the Thanksgiving holiday. While some would argue this ritual will occur whether the economy is down or not, we thought it would be interesting to look back to the most recent downturn in 2001 and see how travel was affected. Hopefully this will shed light on what we can expect this year.
In the summer of 2001, hotel demand started to decline due to the fall of several major dot-com companies and then accelerated after the tragedies of 9/11. Those year-over-year declines continued through the Thanksgiving holiday, when demand fell 7 percent from 28-30 November compared to the same period in 2001. Average occupancy for this period was 53 percent with an average room rate of US$78.91, which was down 8 percent over same period last year.
During the 2002 Thanksgiving holiday, hotel demand was down only 5 percent, but room rates suffered. The average daily rate for the three-day holiday period was US$73.76, down more than US$5 from 2001. It was not until Thanksgiving 2003 that the industry experienced positive hotel demand and ADR growth. Though these key performance measures were moving in the right direction, actual occupancy and rate were not at 2001 levels.
Now let’s fast forward to where we are today and with the Thanksgiving holiday a few days away, can we draw some performance parallels from 2001.
Starting around the fourth quarter of 2004 through the third quarter of 2006, the U.S. hotel industry experienced record-breaking room demand and rate growth. Room demand started to decline by the end of 2006, was flat to negative in 2007 and was in a deep dive by third-quarter 2008.
During the 2007 Thanksgiving holiday, hotel demand was down 0.3 percent, but rate growth was still positive 6 percent over the previous time period. Actual occupancy was slightly above 57 percent, and ADR was more than US$105.
Similar to the trends we experienced during the 2001 downturn, the key performance indicators suffered the greatest the following year. Thanksgiving 2008 room demand dropped 18 percent, and ADR was down 12 percent over the same period in 2007. Average occupancy for this period declined to 45.6 percent and the actual ADR dropped more than US$12 to US$92.54.
As we know, the hotel industry is extremely cyclical, and we can learn a lot from past downturns. Each day we hear that our economy is moving out of this recession stage and into recovery. With this said, one would presume the 2009 Thanksgiving holiday will not be as bad as what we experienced in 2008 but not back to 2007 levels.
STR releases weekly industry performance number each Wednesday for the previous week. We will be eagerly waiting next Wednesday to see just how many people traveled this Thanksgiving holiday and what impact this had on the U.S. hotel industry.