Booking next hotel stay should be easy
By Barbara De Lollis
USA Today
Travelers may notice quieter hotels next year.
Hotel forecasters have been busy revising their expectations in light of all the economic turmoil and an anticipated drop in business travel. One forecast suggests that U.S. hotels will fill the smallest percentage of rooms since the figure has been tracked.
In its 2009 forecast completed in September, but revised after the stock market collapsed in October — PKF Consulting of Atlanta expects hotels to fill an average of just 58.3 percent of rooms, or a 4.4 percent drop in the occupancy expected this year. If true, it would mark the worst occupancy rate that U.S. hotels have achieved since 1988, when Smith Travel Research started tracking the data.
The current lowest occupancy rate, according to Smith Travel, was 59 percent in 2002 — the first full year after 9/11 and the SARS epidemic. Separately, Smith Travel's revised forecast is for occupancy to drop 3.5 percent in 2009, to 59.1 percent.
"Toward the end of September, it was as if somebody, somewhere hit the pause button," says Mark Woodworth, president of PKF Consulting. "People said, 'I'm going to stop what I'm doing and adjust my strategies going forward.' "
October has been even more discouraging. Marriott International CEO Bill Marriott wrote in his Nov. 3 blog that "in just the last few weeks, our business outlook has further weakened."
The story has been much the same at Hawai'i hotels. Room demand declined across all islands in August, with statewide occupancy dropping 6.6 percentage points to 74.4 percent for the month. It was the sixth consecutive decline in hotel occupancy and the outlook is for continued weakness in the sector.
Part of the problem nationwide is that declining demand for hotel rooms will coincide with a boost in new rooms — a double whammy for hotel owners and operators.
Lenders started to fuel hotel development starting in late 2005, and many new properties have been opening this fall — just as the market started to slow, Woodworth says. What does the climate mean for business travelers besides a calmer lobby?
"There was so much demand for hotel rooms in so many markets that managers were able to achieve extraordinary rate increases year after year," he says. "Now, the pendulum has swung from being in the seller's favor to being in the buyer's favor."
Hotels across the nation are trying to appeal to customers with promotions, discounts and other perks. The Hotel Indigo in the Chicago suburb of Vernon Hills, for instance, is offering guests a $25 gift card when booking a room under its "economic stimulus" package through Jan. 31, 2009.
The average hotel rate for New York City ($309) already dropped by nearly 6 percent for the first four weeks of October, versus the same period a year ago, says Jan Freitag of Smith Travel. In Hawai'i, the statewide average daily rate fell to $211.34 in August, down 0.9 percent from the same month a year earlier.
"That certainly didn't play well with anybody," Smith's Freitag says.
The backlash — the "AIG effect" — was surprisingly swift, he says. The average occupancy rate for luxury hotels dropped by nearly 12 percent, and rates dropped by more than 5 percent for the first four weeks of October, versus an 8 percent occupancy drop and less than 1 percent rate drop overall, he says. The financial, insurance and real estate industries "specifically are going to be very, very careful (about) how they spend their money and what the public perception is," he says.
