HENDERSONVILLE, Tennessee—Festivals and sporting events are a boon to many towns and cities throughout the United States every year. Tourists come from near and far to stay in local lodging; spend money in restaurants and retail shops; and buy groceries, gas and souvenirs in local stores. These events draw thousands of visitors, sometimes for a week or more, to a destination they may not have considered otherwise. Lodging operators rejoice as daily rates soar and occupancies creep closer to the maximum.
Looking at lodging performance tied to major events in the early months of 2009 and comparing those results to previous years, the primary question is how much did hotel operators in markets with major events suffer in early 2009 because of the recession and a general decline of hotel demand?
To demonstrate the effects of a major event better, let’s focus on areas where the impact is more visible in the data: Augusta, Georgia; Talladega, Alabama; and Louisville, Kentucky. Augusta is the site of the Masters, one of the four major golf tournaments each year. Talladega is home of the Talladega Superspeedway and an annual NASCAR race in late April. Louisville is the home of Churchill Downs and the Kentucky Derby. All data reported will be reflective of the week (Sunday through Saturday) in which the event took place.
To understand hotel room demand levels in the subject markets better, the chart below details roomnights during the week of the event for the previous three years. As the data shows, roomnight demand increased at the Masters and Talladega in 2009 compared with 2008, while Louisville experienced a small decline of room demand. The data shows that even during the economic recession, room demand growth tied to these major events in 2009 was flat when compared to 2007 and 2008 and the reported occupancy declines were a result of supply growth.
Given demand growth was flat for the weeks of these major events, the rate side of the equation needs to be explored to understand the impact on revenue. The question at hand is: Did hotels have to discount heavily to maintain demand? The performance of hotels during earlier events should provide guidance and insight to hoteliers with events upcoming in their locales.
As the chart below shows, rates held steady around the Masters and NASCAR events, while rates in Louisville experienced a decline of almost 11 percent. It would appear hoteliers in Augusta and Anniston/Talladega were more resistant to discounting room rates leading up to their respective events. Because the Louisville market outpaces the others in terms of hotel supply and supply growth, increased competition may have led to heavier discounting during week of the Kentucky Derby. It’s also plausible visitors to Louisville traded down in their hotels choices to reduce travel cost.
As the data above shows, hotels in selected markets with major sporting events didn’t experience significant demand declines in 2009 as some may have expected. Given the nature of these events and the loyalty of sports fans, it appears demand for lodging tied to these events has persevered even in a recession. While the three events detailed are only a sample of the events taking place throughout the United States each month, the numbers tell an important story. Hoteliers with major events upcoming in their cities, especially those cities with limited lodging options, should take note that perhaps demand losses won’t be as severe as anticipated.