NASHVILLE, Tennessee—Leveraging the differences of a niche hotel can yield more revenue as guests are looking to those properties to provide unique experiences and amenities, according to Lauren Faulkner, business development executive at STR.
Faulkner outlined how well various niche segments are performing in comparison to overall United States data in a session titled “Off the beaten path: Niche segments make an impact” at last week’s Hotel Data Conference at the Loews Vanderbilt Hotel in Nashville, Tennessee.
STR, the parent company of HotelNewsNow.com, defines extended-stay hotels as those focused on attracting hotel guests for extended periods of time and quote weekly rates, Faulkner said.
“Extended-stay properties consistently have stronger occupancies than non-extended-stay properties,” she said.
However, during the downturn, extended-stay hotels experienced greater declines in average daily rates than non-extended-stay properties, Faulkner said.
But the segment continues to post stronger rates than non-extended-stay hotels. Year to July, the upper-end of the extended-stay segment reported an ADR of $117.22, the lower-end of the segment reported an ADR of $55.20 and the overall U.S. reported an ADR of $114.68.
All-suite hotels, which are defined as properties with rental units that consist of one or more bedrooms and may include a separate living area, have finally surpassed their pre-downturn occupancy levels in 2012, Faulkner said.
The segment reported occupancy of 69.5% in 2007 and were at 71.2% occupancy year to July.
“All-suite rates are working back to 2008 peaks,” Faulkner said. While they stood at $105.80 in 2007 and went down to $94.17 in 2010, they were back up to $102.70 year to July.
Boutique hotels are those that appeal to guests because of their unusual amenities and room configurations. They are normally independent and smaller than 200 rooms, but Faulkner said STR codes three chains as boutique: W Hotels, Kimpton Hotels and Joie de Vivre properties.
Boutiques are highly saturated along the California coast, the Gulf of Mexico and the northeastern U.S., according to STR data.
Because the segment experienced a 10% drop in occupancy during the downturn but cut rates 20%, it has had to work twice as hard to raise ADRs during the recovery, Faulkner said.
The segment’s absolute occupancy of 72.3% (through July) has surpassed its peak 2007 level (71.7%), but July year-to-date ADR ($214.34) is $21 shy of the peak in 2008.
Looking further into what is happening with rates, the boutique segment has almost made up revenue lost on the group side during the recession, but lags on the transient side, Faulkner said. Transient ADR for the segment was at $219.52 year to July, down more than $10 from its peak in 2008 of $232.74.
Resort properties are defined by STR as those considered a standalone destination because of the extensive amenities, such as golf courses, access to beaches and pool facilities, associated with a vacation experience.
“Resort occupancy has returned and surpassed 2007 numbers,” Faulkner said. In 2009, occupancy dropped to 56.9%; it is 68% year to date through July.
It is important to note, she said, that transient occupancy at resorts didn’t take a major hit during the downturn. At its lowest point in the cycle, in 2010, transient resort occupancy was 31%, and it was up to 36% year to date through July.
Going forward, revenue-per-available-room gains in the resort segment are expected to be driven by ADR growth, Faulkner said.
Resort hotels are beginning to increase their rates. From the segment’s peak in 2008 of a $210.15 ADR, it went down to $185.30 in 2010. Year to July, the segment was at $205.09.
Year through July, RevPAR increased 8.2% over the last year.
Convention hotels vs. conference hotels
Convention hotels are those with 300 rooms and large meeting facilities but are not part of the international conference center group. Conference hotels are those that place major focus on conference operations. Those hotels must meet guidelines for the International Association of Conference Centers.
Convention hotels consistently have higher occupancies than conference hotels, Faulkner said. Conference hotels are usually right in line with overall U.S. occupancy. Year through July, convention hotels posted 68% occupancy.
Although conference hotels are in line with the nationwide occupancy rates, the segment’s ADRs are significantly higher. Through July, the U.S. reported an ADR of $104.31, while conference hotels were at $133.56. Convention hotels reported a $165.64 ADR during the same period.
Golf, ski and spa
Hotels with an on-property golf course, easy access to ski slopes or a designated spa facility with treatments fall under STR’s golf, ski and spa segments.
Through the downturn, ski hotels experienced the largest occupancy decline as well as the strongest recovery out of the three niche segments, Faulkner said.
In 2009, ski hotels experienced an 11.5% decline in occupancy, and went up 8.7% in 2010. The segment has continued to show year-over-year growth since then and year to July has shown a 0.9% increase.
As for rate performance, golf hotels were the quickest to rebound, Faulkner said. In 2009, the golf-hotel segment experienced a 10.4% year-over-year drop in ADR, but increased 10% in 2010 and rose 6.5% year-to-date in 2012.
As for spa hotels, the specialty properties consistently post the highest absolute occupancy of the three segments, and the U.S. as well. Year through July, spa hotels were at 69% occupancy, outpacing the U.S. by 8%, Faulkner said.
“It’s good to be different,” Faulkner said. The majority of the niche segments outperformed the total U.S.
However, it’s important to keep in mind, she said, that niche segments are not immune to industry downturns.