Although hotel rates continue to climb, especially in first-tier markets, hospitality industry consultants say that buyers have reason to be optimistic that the pendulum will once again swing in their favor.
“Hotels continue to aggressively pursue rate increases. Low rates locked in by meeting planners two, three or four years ago now look horrible to a hotel’s convention planning department,” says Bruce Ford, senior vice president at Portsmouth, N.H.-based Lodging Econometrics.
However, he says, new hotels opening in the current construction cycle have yet to peak, and next year will see a significant influx of new central business district and resort properties. Absorption, he adds, should start to be a problem for hotels in certain markets in 2009.
For the first quarter of this year, the average daily rate (ADR) for the country’s top 25 metro markets increased by 7.2 percent over the period last year, and in other markets, by 6.4 percent, according to Smith Travel Research (STR), a Hendersonville, Tenn.-based company that tracks hotel rates. This followed a 2006 ADR increase of 9.4 percent for the top 25 and 5.4 percent for other markets.
However, STR figures also show that last year’s nationwide average hotel occupancy of 63.4 percent was just a 0.5 percent increase over 2005. During the first quarter of this year, average occupancy actually fell by 0.9 percent over the same period in 2006.
Of the top 25 metro markets, 12 ran average hotel occupancies below 67 percent last year. And, while this might not be reflective of rates in central business districts, 11 of the top 25 had ADRs of less than $100 last year.
Brian Stevens, president and CEO of ConferenceDirect, a Los Angeles-based site selection and meeting planning services company, maintains that hotels are just trying to make up for the slow business climate of several years ago. He says that if you built a hotel 10 years ago, business for the decade would fall below that originally forecast.
He also emphasizes that money can be still be saved and that cities running a 65 percent occupancy rate, about the national average, are not really in a seller’s market. He says that even hot destinations like Chicago have “very cold times” during the first quarter, and in some markets day-of-the-week patterns are more important than ever.
Turning to sources such as CVBHotRates.com is another way to find good deals. The company, which was formed in 2004 with 17 CVB partners, now has 42 bureau partners, which fund the free planner service.
CVBHotRates.com focuses on short-term bookings from six to 18 months before the meeting. Its Web pages can be accessed through CVB websites or its own site.
“When we started, the country was coming off a downturn and we listed distressed properties,” says Donovan Shia, president of CVBHRates.com. “With the robust economy, the climate has changed, and we’re more geared to helping meeting planners. We’re seeing an increase in repeat visitations.”
He emphasizes that each destination is very different, that most hotels update their offerings on a monthly basis and that situations can easily change.
“Orlando has a broad range of venues and incredible deals. A room that could be $300 in March might be half price in November and December,” he says.
Destinations offering good winter deals include Myrtle Beach. N.C., and Hilton Head, S.C. In Texas, Houston hotels usually offer lower rates in summer and higher rates in the fall, whereas San Antonio has no defined seasons and offers deals during pockets of lower demand.
