They say that "flat is the new up," and according to a top hospitality industry consultancy, the same could be said for the hotel business in 2010, but as 2011 unfolds, expect surging occupancy rates to translate into as many room rate increases as the recovering market can bear.
"Overall in the United States [room] rate is just shy of being flat," says Lana Yoshii, vice president of content development for Hendersonville, Tenn.-based Smith Travel Research (STR). "However, that’s kind of masked by New York City, which is up by almost 8 percent in average daily rate. If you throw out New York it really skews the statistics, and it’s very flat."
Occupancy rates, however, are rising, and that means prices will follow as the year progresses.
"We expect demand to be 7.4 percent higher than rooms sold in 2009," Yoshii predicts. "So clearly there’s been the big increase in demand in 2010, and there’s probably going to be a good increase in 2011, so the way hotels can make money is through rate. We expect in 2011 for rates to be up, to [an average of] $101.73. We expect rate to increase 3.9 to 4 percent [factoring both transient and group]."
According to Yoshii, one of the recent rate winners has been the Crescent City, although even its increase has been relatively modest.
"The markets that have been more confident in terms of rate growth are markets like New Orleans. Their rate growth is 3.3 percent year-to-year through November, and that’s not aggressive by any standards," she says, adding that markets such as Detroit, Houston and Phoenix are on the lagging side, registering at least a 4 percent decrease in average daily rate year-to-year last November, although it could’ve been much worse.
"When you compare it to where they were last year, they’re in single digits now, and they could’ve been in a double-digit decline," she says. "They’re still climbing out of a very deep hole."
When it comes to the meetings and conventions segment of the hospitality industry, Yoshii and STR expect a modest turnaround this year. The worst, it seems, is behind both planner and supplier.
"The big surge in demand increase was 2010," she says. "Next year there will be an increase in attendees and meetings. With the recent recession we went through we kind of had the worst-case scenario."
