As we approach the final months of 2009 we will be watching the weekly and monthly performance results very carefully. In particular, from about now (mid-October) through the rest of the year the two most important factors to watch are demand and average daily rate. While it is obvious that the ADR results will follow demand strength, the industry’s response to the rebounding demand or the lack there of, will be a telling signal for next year.
In trying to decipher the demand results for the remainder of the year, we have to look at it in terms of two time periods. First is from mid-October through November and then December. In 2008, lodging demand was off by around 8 percent in November, but less than 4 percent in December, before returning to the 8-percent range in the first few months of 2009.
Therefore, in looking at demand percent change this year, it would be reasonable to expect that November results should look better than we have seen at any time this year and will, at least on the surface, probably be better than the December results. If these next couple of months plays out that way, poorer December demand results may not mean that improving fundamentals have taken a step backward.
Having said that, the actual year-over-year change in demand in the month of November will be a crucial test. With the comps to last year very easy, we are expecting lodging demand for the month to be slightly positive. If it turns out that there is a demand decline that month, it would be extremely disappointing because it would come on top of the 8 percent decline recorded last year.
When we get to December, we are expecting demand year-over-year change to turn negative again because the comps to 2008 are not as favorable. Therefore, if lodging demand in November is greater than plus one, we would regard that as a positive indicator. If it is more than negative 1 percent to 2 percent, it would be a disappointment. For December, we expect demand to be in the 1.5 percent range. Depending on the variation from that number we would either be encouraged or disappointed.
Turning my attention to the ADR, while we do not expect much improvement from the current 10-percent declines that we have seen over the past several months, we do hope to see the numbers beginning to trend at least slightly better. If there is no improvement in the rate of ADR declines throughout the remainder of the year, that would be an indication that, for the most part, the industry is not convinced that a turnaround is imminent. If, on the other hand, there is a firming up of pricing then we could infer that there may indeed be a feeling that 2010 could be slightly better than we now expect.
So, pay attention to the demand and ADR results for the rest of the year because they will tell a very interesting story!