As I’m sure most readers of HotelNewsNow.com know, last week STR held its second annual Hotel Data Conference. As part of the opening session, Jan Freitag and I shared the opening session and highlighted the United States lodging industry’s current performance. Jan highlighted the potential obstacles and pitfalls that may yet get in the way of a sustained hotel industry recovery.
To help highlight these factors, Jan used a Star Wars/Darth Vader analogy, which was not only fun, but illustrated the precarious and unsure nature of the hotel industry’s recovery. The things that could yet derail a rapid recovery range from a sluggish recovery in group business, new additions to room supply in New York, historically low levels of occupancy in many markets and the question of how aggressive the hotel companies are going to get from a room-rate perspective.
To date, the main ingredient in this recovery has been a very quick and strong recovery in room-night demand. This growth has been much more dramatic than anyone anticipated and certainly where any well balanced industry recovery must start. It is at this point in the growth cycle where the second phase of recovery—room-rate growth—should become apparent. To date, with the exception of hotels in New York City, there simply has not been the room-rate recovery that one would expect or we have seen in past cycles.
As we move into the fall, it is very clear that what happens with pricing will determine the velocity and magnitude of the industry’s recovery. This is especially true with the 2011 room-rate negotiations that take place this time of year with corporate clients. What room rates and what level of rate growth get negotiated with this critical demand segment? The same is true for group rates and additionally, how many years out will brands and properties negotiate and at what level of price increases?
Needless to say, the coming months are critical for the Republic’s—I mean hotel industry’s—struggle to overcome the imposing and seemingly unassailable and widely feared “Discounting Death Star.”
Room-rate growth, you’re our only hope!!!