HDC: Forecasts show growth amid uncertainty

• “In the last 12 years, there’s only been two years where ADR has been what the inflation growth would have suggested it need to be to keep up with the growth in costs,” said STR’s Mark Lomanno.
• “Big business is still traveling. … We have to respond to that from a rate perspective,” said TravelClick’s Kristi White.
• “The demand rebound … is reversing consumer satisfaction,” said PwC’s Scott Berman.

NASHVILLE, Tennessee—What’s a data conference without a healthy dose of forecasting?

Fortunately for attendees of the third annual Hotel Data Conference, the prognosticators came out in full force Thursday afternoon during the closing general session titled, “We made it this far … now what?”

Mark Lomanno, chief strategy officer, STR
The past two years have yielded positive performance results for the U.S. hotel industry, Lomanno said. But while demand and occupancy are on the rise, growth in average daily rate still remains sluggish.

There’s a lot of “noise” putting downward pressure on pricing, he said—everything from street-corner warfare to political instability.

Such short-term pricing issues are somewhat understandable. More disturbing is the inability of hoteliers to push rates over the long term, Lomanno said.

“In the last 12 years, there’s only been two years where ADR has been what the inflation growth would have suggested it need to be to keep up with the growth in costs,” he said. “… That’s two out of 12. That’s not a great number.”

What rate growth does exist is concentrated at the high end of the market, he said. Year-to-date through June 2011, ADR has increased 5.9% in the luxury segment while it has risen a statistically insignificant 0.4% in the economy segment.

Source: STR

Kristi White, global director of revenue optimization, TravelClick
White brought a more global perspective to the stage—albeit one that was decidedly dreary.

“At least one if not possibly two countries will be making a move to pull out of the European Union,” she said. “… They’re getting tired of taking care of another country’s college students who took out too many credit cards and can’t quite pay their bills.”

Economic volatility abounds in the U.S. as well, White said, pointing to the fact that Americans cut spending for the first time in 20 months during June.

“There is a huge consumer confidence issue,” she said.

On the positive side, GDS bookings—which White said is a strong forward-looking indicator—are up over both 2007 and 2008.

“Big business is still traveling. … We have to respond to that from a rate perspective.”

TravelClick forecast (6- and 12-month growth projections by world region)

Mark Woodworth, president, PKF Hospitality Research
First, the positive side: Woodworth said corporate profit growth has been “great” and will continue to be “fairly attractive.”

Profitability in general should exhibit continued increases next year, he added.

But there exist macroeconomic headwinds that represent significant obstacles to full-blown recovery. Among them: unemployment, lack of airline seat capacity, declining guest satisfaction, and sputtering growth in home prices.

Scott Berman, U.S. leader, hospitality & leisure, PricewaterhouseCoopers
Berman began his presentation by recapping his own tumultuous July travel schedule, in which he spent a total of 23 roomnights in 18 U.S. cities. The swing comprised numerous irritations, annoyances and outright assaults on the concept of guest satisfaction.

“There is such an opportunity for the hospitality industry to be a white knight, to build good will … with a harried, distrustful and weakened traveling public,” he said.

But with the U.S. economy in an apparent standstill and an alarming percentage of hotel product suffering from obsolescence, Berman had his doubts.

“I fear, and I hope I’m wrong, but I fear that there’s some apathy within our own industry that needs to be addressed,” he said.

Much of the trouble is simply operational. As demand improves and more guests fill hotels, those same hotels are struggling to provide the necessary levels of customer service.

“The demand rebound … is reversing consumer satisfaction,” Berman said. “… This is clearly in my mind impacting the bottom-line performance industry wide.”