Occupancies rising this year, rates in 2011
By Nadja Brandt and Armorel Kenna
Bloomberg News Service
LOS ANGELES — Julian Saipe is finally taking his family on the dream vacation he put off amid last year's recession. Apparently, so are plenty of other people.
Saipe was surprised to find the Oceana boutique hotel in Santa Monica, Calif., and felt no need to negotiate a lower price. "I tried to do a deal and they said no," said Saipe, 41, managing director of Zafferano, a corporate party catering business in London. "It seems really busy."
Hotel occupancy rates are forecast to rebound this year in the U.S. and Europe. Room prices may follow in 2011, according to analysts including Patrick Scholes at FBR Capital Markets & Co. Some luxury hotels have already been able to lift rates as demand for $600 rooms, butler service and poolside cabanas recovers in cities such as Miami, New York and London.
"Luxury hotels, especially, have some ability to raise prices again because they were hit the most last year," Scholes said. "They are the ones that cut prices the most — as much as 25 percent."
Oceana, which boasts sea views and complimentary beach cruiser bikes for guests, has had higher revenue in the past two months compared with a year earlier as a result of boosting occupancy in slower periods and raising room rates in times of high demand, said Kate Jerkens, vice president of sales and marketing at owner JRK Hotel Group. Regular room rates for July currently start at about $399 a night.
The overall U.S. hotel occupancy rate may jump to as much as 59 percent this year from 55 percent in 2009, said Arlington, Va.-based Scholes. Room prices may then rise next year for the first time since the summer of 2008, by an average of 4 percent to about $98, he said.
Europe's total hotel occupancy may climb to 65 percent in 2010 from 61 percent last year, with the average room price in 2011 increasing by 5 percent, Scholes said.
Occupancies peaked in 2007 at about 64 percent in the U.S. and 69 percent in Europe.
Tourists seeking to escape a winter of heavy snow in the U.S. Northeast are also booking sunshine getaways in Florida and California.
"On the leisure side, we certainly are enjoying a rate premium year over year," said Bruce Seigel, director of sales and marketing in Naples, Fla., for Ritz-Carlton Resorts, a Marriott International Inc. brand. He declined to disclose specifics. "Many guests from the U.S. Northeast with clear signs of exhaustion are arriving at our door." Overall room rates, including corporate bookings, are little changed, he said.
In January, occupancy at hotels with the costliest rooms in the U.S. climbed to 57 percent from 52 percent a year earlier, according to Smith Travel Research Inc. Of the 25 biggest markets, those with highest occupancy rates overall were Miami; O'ahu; New York; Los Angeles; and Orlando.
Prices for top-end rooms declined 16 percent in 2009 as tourists and businesses trimmed travel budgets during the recession, which was the industry's worst slump since the Great Depression, according to Smith Travel. Revenue per available room at U.S. luxury hotels plunged 24 percent last year, the most of any hotel segment.
Now, companies including Morgans Hotel Group, the New York- based operator of hotels including the Mondrian in Los Angeles and London's St. Martins Lane, say they are starting to increase prices in some cases.
Morgans reported higher revenue per available room at its London and Los Angeles properties in the fourth quarter. At the Mondrian, where the lobby features a swing, occupancy rose in January from a year earlier, said Marc Gordon, Morgans' president. He declined to give specifics on individual hotels.
At the Breakers in Palm Beach, Fla., where high-season rooms start at $500, the hotel expects a 20 percent increase in occupancy in this year's off season from 2009, Paul Leone, the hotel's president, said by phone. The higher demand means that the Breakers has been able to raise prices from last year, though they are still below 2008's level.
"Leisure travel is leading the recovery, with travelers who may have been skipping their second holiday returning to the market," said Richard Power, brand managing director for the Rocco Forte Collection, which has 13 hotels in Europe, including Brown's in London, and has raised rates at selected locations. "People are feeling more personal-spending resilience."
Carrie Lonsdale paid more this year for accommodations at the Ritz-Carlton hotel in Naples, Fla., where she and her family have traveled to from Maine each year since 2003.
"I spend a lot of money on this vacation, but it's worth it," said the stay-at-home mother, 36. "You feel special and that makes the price of luxury worth it."
At the five-star resort, an ocean-view room costs $649 a night for the week of March 29, according to its Web site. Amenities include lap and mineral pools at the spa deck, private poolside cabanas and the Nature's Wonders center with animal exhibits.
Four Seasons Hotels Inc., whose Web site quotes a starting rate of $655 a night for a standard room in New York, has been able to increase some prices there, as well as in Chicago, Palm Beach and Santa Barbara, Calif., said Susan Helstab, executive vice president of marketing for the Toronto-based hotelier. Corporate rates have remained unchanged, she said.
Hotel shares rallied in the past year as investors anticipated an earnings recovery. Marriott almost doubled as of Tuesday as the company cut staff, froze hiring and lowered investment spending to trim costs. It still was down 39 percent since the end of 2006.
Starwood Hotels & Resorts Worldwide Inc., the owner of the St. Regis and W Hotel brands, climbed more than threefold in the past 12 months and Morgans was up 88 percent.