The word on the street within the hotel industry is that the road to recovery is open after an assault of record-breaking proportions. If the road indeed is open, it simply is only just passable and there’s still a lot of debris that needs to be removed.
One of the industry’s fundamentals appears to be shifting into second gear, according to STR. The occupancy rate in the United States for the first quarter was up 2.3 percent to 51.9 percent. However, average daily rate fell 4.3 percent to US$96.27 and revenue per available room decreased 2.1 percent to US$50.01.
Bobby Bowers, senior VP at STR who I consider the Pat Summerall of hotel analysis—quiet and retrospective but his insight packs a wallop—said the easy year-over-year comparisons helped boost the numbers. In other words, the first quarter of 2009 was so bad, there was no place to go but up.
But Bowers’ insight revealed that the number of rooms sold grew in March for the fourth consecutive month, and March room revenue increased for the first time in 19 months.
To top it off, the weekly performance of U.S. hotels two weeks ago included increases in occupancy (1.8 percent), ADR (7.0 percent) and RevPAR (9.1 percent)—the first time that all three metrics were positive during a non-holiday week since 13-19 January 2008.
So, every time I get giddy that the worst might be over, I talk to a hotel owner. That brings me back to Earth in a hurry. There aren’t many owners who are ready to open the windows, crank up the stereo and rock the night away just yet. There’s that little thing called ADR (or lack of it) that is keeping hotel owners in check.
At a dinner last month in Atlanta, I had the pleasure of dining with the owner of a hotel in Washington, D.C., that falls into the midscale-with-food-and-beverage category. The property has been with his family for decades, and this particular property enjoyed a steady piece of business from a West Coast client that filled 10 to 20 rooms every weekend for almost 20 years. The US$89 rate didn’t provide them with gold and diamonds, but it was a solid core of business the hotel could count on … until this year. The hotel owners said a nearby LUXURY hotel offered the group a US$79 rate, and his hotel never had a chance.
So, we’ve all heard that recovery is in the air. We’ve all heard that travelers are starting to return to the skies and highways. We’ve all heard that the hotel industry needs to aggressively raise its rates. But we also have all heard about the drastic discounting that remains a staple for many revenue managers, general managers and owners. Until that mentality reverses, the road to recovery will remain a one-lane passage.