PHOENIX, Arizona—The recession might or might not be officially over, but it certainly seems to be winding down. To help attendees of the 2009 Lodging Conference get their bearings in the new normal, analysts presented the industry by numbers. Here’s what they had to say:

Mark Lomanno
President
Smith Travel Research

• The industry is performing at historic lows.
• Supply growth is still an issue.
• 4Q 2009 will be less worse, while 2010 will show moderate improvement.

Mark Lomanno, STR

“In the previous two downturns, when the demand line began to decline, at that point in time, supply numbers also had begun trending downward,” he said.

That’s not the case this time around.

Through August 2009, the supply 12-month-moving average was up 3.1 percent, while demand had plummeted 6.6 percent. At the same time, occupancy was down 9.4 percent, and average daily rate had fallen 6.3 percent. Revenue per available room is down 15.1 percent with no end in site. The measure could drop by as low as 18 percent to 19 percent, Lomanno said.

While demand has shown stabilization during the summer months, that’s largely a result of a business mix and the influx of leisure travelers. October and November will prove crucial months to gauge the temperature of the ailing industry. Easy comps from a horrendous end to 2008 should yield more favorable numbers, but if the industry experiences more demand declines, it’ll have to start thinking of that as a negative on top of a negative, Lomanno said.

A net increase in supply isn’t helping matters. Not only are new guestrooms coming online, but old hotels aren’t closing as they have in the past—2009 will have the fewest hotel closings in 15 years, Lomanno said.

“You’d think just the opposite, that the economic conditions would dictate more hotels are closing,” he said. “Supply growth numbers aren’t going to decline to the level everybody expected them to until these hotels close.”

Older hotels with no debt service still can turn a profit at 30-percent occupancy, Lomanno said. As a result, those rooms aren’t going to go away until someone buys them or knocks them down when the real-estate market picks back up.

In part because of the new supply, the road ahead will prove challenging, albeit less bumpy than the first three quarters of the year.

“The fourth quarter of ’09 will be less worse because the comps get better,” Lomanno said. “Moderate improvement in 2010, and meaningful improvement in 2011.”

Steve Swope
President and CEO
The Rubicon Group

• Rate declines are a necessary evil to steal share.
• Channels of demand are shifting dramatically.
• Uptick in booking pace could signal imminent recovery.

Steve Swope, Rubicon

“No matter how badly we would hope prices wouldn’t decline in the face of declining demand, we don’t get to suspend the economic laws of supply and demand,” Swope said. “(Hotels) are going to take the actions they need to take to steal the share. … The real question is if hotels are going too far.”

So are they?

As ADR continues to fall across the board, even as occupancies begin to flatten out, one might surmise as much, but October will tell the real tale, Swope said. The month should yield favorable performance results compared to the abysmal returns last year, but the jury’s still out. While group rates began to show improvement, transient numbers, which were experiencing an uptick during the summer months, have begun to flatten out.

One measure that’s been consistently up is the number of bookings through online travel agents, such as Priceline and Expedia. Such third-party reservation sites experienced a 60-percent, year-over-year increase in bookings. Bookings on hotel Web sites have increased slightly for stays in September and October, while direct-to-hotel phone bookings have softened significantly. The fate is much bleaker for global distribution systems.