HENDERSONVILLE, Tennessee—As the United States economy continues to struggle in the fourth quarter of 2008, no hotel segment is immune to the effects of falling demand. That is certainly the case with convention hotels, where bare-bone travel budgets have paved the way for an uphill battle to maintain occupancy and rates. With the increase of room supply and declining demand growth levels, negotiating power will continue to shift to the customer as sales staff at these properties fight for a smaller client pool with shrinking budgets. 

Convention segment overview

At STR, we define a convention hotel as a property with a minimum of 300 rooms and large meeting facilities (20,000 square feet of meeting space minimum). As of October 2008, the STR U.S. hotel census database identified 847 convention properties, totaling 556,419 guestrooms. This represents a 1.0-percent increase of available guestrooms from October 2007 (compared with 2.5-percent growth industry-wide). 

While convention hotels account for only 1.7 percent of the total U.S. hotel properties, they represent nearly 12.0 percent of total room supply. Convention hotels average 657 guest rooms compared with the national average of 93 guestrooms per property. As of October 2008, the Las Vegas, Nevada market leads the U.S. in convention hotel guest room supply with 83,430 rooms, followed by Orlando, Florida with 29,075 rooms and Chicago, Illinois with 23,210 rooms. Of the 162 markets in the U.S. tracked by STR, 137 have at least one convention hotel. 

Convention segment performance

The current operating market has taken a toll on the entire industry, and the convention segment has trended lower than the national average in growth rates of two key performance metrics: average daily rate and revenue per available room. As the table below shows, both the national market and the convention segment have experienced negative occupancy growth of 3.4 percent year-to-date through October. However, the year-to-date ADR growth rate for the convention segment (2.4 percent) is lower than the national average (3.2 percent).  Consequently, the year-to-date RevPAR growth rate in convention segment is down 1.0 percent compared to 0.3 percent nationally.