NASHVILLE, Tennessee—With a recovery in the transient and group segments, the hotel industry is bouncing back—albeit slowly—and proving business and leisure travelers are on the road once again.
At the fourth annual Hotel Data Conference, Vail Brown, VP of global business development and marketing at STR, parent company of HotelNewsNow.com, uncovered that group and transient trends are leading the recovery during her session titled “By Land and Air: Group & Transient Trends.”
Brown said the industry is notorious for building into a downturn, opening 175,000 rooms from the fourth quarter of 2008 to the end of 2009. However, year-to-date through July 2012, fewer than 14,000 rooms opened, which has aided hotels’ performance. “We have more rooms than ever before that we are selling,” Brown said.
Focusing on the luxury, upper-upscale and upper-tier independent market segments, Brown said that during 2005, the first robust year after the previous downturn, “transient demand led recovery. … As of July 2012, we have sold to date 19 million transient hotel rooms.
Vail Brown, STR
“From a group standpoint,” she continued, “it’s slower to come back from recovery but came back faster than people expected,” selling 9.5 million room as of July.
“We’re definitely in a recovery standpoint from transient and group” and demand is back, she said.
“We have gotten back up to the peak from a transient standpoint,” Brown said.
Average daily rate for the transient segment is more than $2 off the peak in 2007, according to STR data. “ADR and occupancy are trailing about the same. We’re not making up for all the discounting we did during the downturn,” she said.
ADR and occupancy are growing at the same pace is a sign of recovery, Brown said.
Group is recovery … slowly
Group occupancy trends are slowly crawling back to peak periods of 2005 and 2007, trailing three percentage points from those years. Part of this is attributed to the way group booking patterns changed as the economy changed.
“It’s shifted away from doing three nights, moving more toward two-night stays and one-night stays,” Brown said. “We’re not seeing huge corporations booking incentive meetings anymore. We’re not having directors of sales and account managers going on trips to Palm Beach (Florida) or Oahu (Hawaii). Those are in the past now.”
Absorbing that supply will impact occupancy and impact getting back to the benchmark year of 2008, but “the way you book and negotiate group rates, there’s a burn-off period” and recovery is slower because of that, Brown said.
Day of week dynamics
Saturday continues to be the prime day for occupancy, driving more leisure travelers, Brown said. As of July 2012, Saturday occupancy was 72.7%. “It’s close to peak numbers and is continuing to grow,” she said.
Wednesday and Tuesday are the next highest occupancy rates.
Brown added that if Sundays have an occupancy rate of 50%, then Saturdays will have a sellout within a month.
Though leisure is driving occupancy recovery, it is not driving ADR. “The leisure traveler isn’t going to drive the highest rate … the business traveler yields a higher negotiated rate,” Brown said.
“Things are slowly creeping back” and as of July there’s less than a $5 difference between every day of the week, she added.
The dynamics of travel are changing, and group occupancies reflect that; there is a decline in Saturday and Sunday check-ins, Brown said. “We’re not seeing three to four night groups coming in anymore. It’s not Sunday to Wednesday, it’s coming in Monday and Tuesday, and they’re out.”
“Those weekend groups are not occurring that often,” she said.
Pricing the rooms from a group standpoint has not changed. “How it’s ebbed and flowed has not changed. The extent of amount we’re charging changed, but the rate leader is consistently Sunday.”