The Good, The Bad and The Ugly for Hotels

In today’s Hotel News Now, there was a story on summer bookings that I want to hit some highlights of.

First, the good: bookings are ahead of last year.

According to TravelClick, roomnights booked across all its channels in May is pacing 28.9 percent ahead of last year. June is pacing 47.9 percent ahead of last year; July is pacing 55.8 percent ahead of last year; and August is pacing 53.1 percent ahead of last year. The average for the four-month period is 39.2 percent ahead of last year.

via Hotel News Now | Hotels News – Article.

A dramatic increase for sure.  But who’s leading the charge?  It looks like its vacationers.  Notoriously fickle and highly seasonal:

For Shelton, Connecticut-based New Castle Hotels, transient guest bookings have increased 3 percent to 5 percent for the summer months (June, July and August) compared to last summer, and group bookings have increased 5 percent to 7 percent for the same time period. The leisure market is driving the bookings increase.

“Usually, corporate travel leads us out of a recession; but this time, it’s leisure that’s the primary driver,” said Gerry Chase, president and CEO of New Castle, which has 27 properties comprising approximately 4,000 guestrooms in its portfolio. “It’s Americans’ God-given right to travel, and I hope they’ll be out there this summer.”

And with some evidence suggesting disturbing patterns in consumer spending, it may not be a trend that will last as banks will be forced to resume dealing with foreclosures.

Then there’s the ugly.  First, there’s the goal: filling up rooms.  Not profitability, not revenue growth.  Essentially, this is a story of trying to reduce excess capacity:

“We’re still working on demand, trying to fill rooms,” he said. “Corporate demand is coming back but at a slower pace than leisure.”

Second, the forecast: more demand and lower RevPAR/ADR:

The U.S. industry’s summer performance (June, July and August)
Occupancy ADR RevPAR
2009 61.7 $97.04 $59.90
2008 67.9 $107.40 $72.90
2007 70.4 $104.08 $73.25
2006 69.1 $98.12 $68.61
2005 70.2 $91.10 $63.92
2004 68.6 $86.56 $59.42
2003 67.8 $83.10 $56.32

Source: STR

The forecast: higher occupancy and lower revenues.

“We’re forecasting a 4- to 6-percent increase in occupancy and a 1-percent decrease in rate, which is consistent with what we did in the first quarter,” Chase said, comparing the summer months this year to last.

There you go…


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Filed under macro, Markets

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