I don’t fall in the camp that believes the United States hotel industry is in the midst of a full recovery just yet.
Sure, there are signs the worst is over as hoteliers across the country are trying to dig out from the economic mess of the past two years. 2010 has been a year of extremes for the industry. It seems every week sends a different signal regarding the industry’s trek to recovery.
Judging from the hotels I’ve stayed in during the past two months, it still isn’t very pretty out there: One full-service property I stayed at had a 7% occupancy rate on one of the nights of my visit; another property had 12 cars in the parking lot during the overnight hours. That’s pretty scary stuff for hotel owners and operators who are trying to make a living.
One the other hand, more roomnights were sold during July than any other month EVER, according to STR data. Chalk one up for the good guys!
Given the mixed signals the industry is sending, it’s easy to summarize 2010 in a word: change. As Phil Cordell, the leader of Hilton Worldwide’s select-service brands put it during a summer retreat in the mountains of Colorado: “If there’s ever been a time where our industry has to be change-ready, that time is now.”
That retreat, held at the Garden of the Gods Club and the U.S. Olympic compound in Colorado Springs and at a cool dude ranch 8,500 feet above sea level, put into perspective what I heard all year long. The gathering attracted owners, operators, developers and consultants. That cross section of executives came up with the following descriptions of the hotel industry:
The industry needs….
MORE: focus on profitability by brands; leverage in buying power to control costs; profitable sustainability; health and wellness; and food-and-beverage fitness.
LESS: dependency on online travel agencies; loyalty program costs; credit-card fees; clutter in hotel rooms (collateral, pillows, etc.); and brand proliferation.
TO START: raising rates; elevating OTA issues; financing programs and loaning money; having transparent customer reviews on websites.
TO STOP: discounting; amenity creep with products, services and items that guests don’t want; over development; and the notion it should start nickel-and-diming customers like airlines do.
In a nutshell, the hotel industry is seeing positive signs, but there’s still a long way to go before it can say it is in a true recovery. There are plenty of ways to measure success, but in this business there’s only one that truly counts: rates. When we see at least four months of year-over-year increases in rate and when the overall average daily rate gets to within five bucks of its $107 peak in 2008 (it’s about $10 off right now), it will be time to truly break out the recovery bubbly.