Editor’s note: This is a preview of a breakout session to be held during the inaugural Hotel Data Conference presented by Magnuson Hotels in August (see below for more conference information, or by visiting www.HotelDataConference.com.)
HENDERSONVILLE, Tennessee—In preparation for our upcoming Hotel Data Conference in early August, I thought it might be interesting to examine the “rate corrections” that have occurred by chain scale over the last 18 months.
Below are highlights by chain scale of rate growth and absolute levels of average daily rate:
• Luxury hotels have been hit hardest by current economic and operating environment. The current luxury stigma and a genuine lack of business and group demand has driven rates down steadily from September 2008 to more than an 18.0-percent rate of decline through May 2009.
• Upper-upscale properties appear to be suffering from some of the same luxury stigma as those brands positioned/operating in the luxury scale, though they could be benefitting somewhat from a trade-down effect. Current rate of decline in ADR for the category has settled to -12.9 percent to end May 2009.
• Upscale hotels are experiencing moderate ADR erosion—relative to the luxury and upper-upscale segments—of -11.2 percent in May 2009. Trade-downs to select-service offerings and the heavy concentration of extended-stay product within the segment have worked to cushion a rate free-fall in the category.
• Midscale-with-food-and-beverage properties appear to be benefitting from guests seeking better value in a cheaper full-service offering—perhaps one that includes meeting space amenities. Furthermore, a stable occupancy (inelastic demand) in the category over the past several years has helped to dampen any extreme rate corrections. The segment posted a rate decline of 5.8 percent in May 2009, a result that is similar to the decreases seen in its midscale-without-F&B and economy chain counterparts over the last nine months.
• Midscale-without-food-and-beverage hotels have the honor of leading all chain scales in the least amount of decline (lowest loss) in ADR—down 5.3 percent through May of 2009. The segment is benefitting from drive-in leisure transient guests and thrifty travelers at large.
• Historical price points and general positioning of the economy chain scale segment have led to somewhat consistent levels of absolute ADR and rate growth over the last eighteen months. While rate growth in the segment has gone negative given the current economic environment, much like the midscale-without-F&B chain scale, value- and budget-conscious travelers have softened levels of rate deterioration. ADR in the segment is down 6.0 percent for the month ending May 2009.
• Independents, while not defined as a chain scale, make for an interesting review. Managing both yield and price for a single hotel unit rather than a national chain/brand pricing strategy appears to have let independents be the last category to react with ADR corrections for much of 2008. However, rate growth for independents has mirrored that of luxury and upper upscale chains after the financial and economic meltdown that started in the third quarter of 2008—down 10.9 percent for May 2009.
About the Hotel Data Conference
Editor’s note: In preparation for the upcoming Hotel Data Conference, session coordinators and moderators are writing weekly articles about their topics for HotelNewsNow.com.
The Hotel Data Conference presented by Magnuson Hotels will be held August 4-5 at the Renaissance Nashville Hotel in Nashville, Tennessee. The conference will cover many topics such as: U.S. hotel industry forecasts from STR, PKF Consulting, and PricewaterhouseCoopers; revenue-management techniques during a recession; consumer business and leisure travel; hotel demand and industry cycle; and STR data overviews, including top markets, customer segments, chain scale, pipeline and hotel operation statistics.
Speakers and panelists at the conference include: Mark Lomanno, president of STR; Scott Berman, the U.S. industry leader of the Hospitality and Leisure Consulting Group of PricewaterhouseCoopers L.L.P.; Brian Ferguson, vice president of supply strategy and analysis for Expedia, Inc.; Kate Henriksen, senior vice president of investment and portfolio management at RLJ; Robert Morse, senior director of corporate revenue management for White Lodging; Webster O’Brien, vice president of SH&E; Gary Portuesi, vice president of lodging account development for American Express; Mark Woodworth, executive vice president of PKF Consulting; Maria Simos, CEO of e-forecasting.com; Dr. Evangelos Otto Simos, strategist and chief economist at e-forecasting.com; Nate Fristoe, director of RRC Associates; Robert Bowers, Jr., senior vice president of operations for STR; Vail Brown, vice president of global sales and marketing for STR; Brad Garner, vice president of operations and client relations for STR; Duane Vinson, vice president of content management for STR. Moderators include Jeff Higley, vice president of digital media and communications for STR and Lana Yoshii, vice president of new product development for STR.