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Hotel Bookings Spur Optimism As Leisure Travelers Return To Market

Advance bookings of hotel rooms across the country show that occupancy rates are poised to grow again, welcome news after last year’s dismal record for the hospitality industry. That’s the view of Steve Swope, chairman and CEO of Atlanta-based data provider.

“This year we have reason for great optimism. We won’t hit 2008 levels. We won’t hit 2007 levels. But we certainly will eclipse the miserable performance of 2009,” says Swope.

He spoke Thursday at a panel on hospitality industry statistics during the 22nd annual Hunter Hotel Investment Conference at the Atlanta Marriott Marquis Hotel in Atlanta.

Although travel bookings were down in January as winter storms slammed the mid-Atlantic and the Eastern seaboard, the pace of business grew in February, says Swope. In early March, the pace accelerated further.

“As of March 15, the March numbers are showing we’re up 15% in total pace of demand year over year,” says Swope. That means that in the first half of the month, 15% more people booked reservations for the balance of the year than in the same period of last year. “That is profound,” he says.

The market with the healthiest pace of change is Tampa, which recorded 22% more committed occupancies from March 2010 through February 2011. Phoenix, with 19% more advance bookings through next February, and Denver, with 16%, show substantial increases, according to Rubicon.

San Francisco and New York City are enjoying growth spurts in projected occupancy as well, while Houston, Philadelphia and Seattle are still suffering from lower bookings.

Rubicon collects data on future group and transient demand from major hotel companies and distills the information along with 1 billion rates from various hotel distribution channels to develop insights and projections for the hospitality industry’s future performance.

Committed occupancy — or rooms booked in advance — is down 4.3% for March 2010 through December of this year. However, as more consumers enter the marketplace with new bookings, they have begun to pull the occupancy rates up. “We’re optimistic right now that we’re going to continue to see that growth,” says Swope.

New business is being added 5.5% faster than in 2009, Swope notes, and the pace of the new bookings will close the occupancy gap. The pace of demand is the earliest indicator of the hospitality market’s direction, according to Rubicon.

Based on the current data, Rubicon projects that the hospitality industry will surpass 2009 occupancy levels during the third quarter of 2010. “At that point, we’ll have wiped out the deficit that we built earlier this year,” says Swope. He projects that year-end occupancy growth over 2009 will be between 2% and 3%.

The hotel industry has been beset by slumping occupancy rates and falling room rates for nearly two years as businesses cut back on travel budgets to cope with the economic slowdown.

“When we began tracking this information 18 months ago, we immediately saw that overall demand was consistently shrinking month after month. Finally, after 18 months of pain and agony we’re seeing [occupancy rates] swing back up,” says Swope.

Although group travel has not yet recovered from the economic crisis, leisure and individual travel have picked up, according to data from Rubicon as well as Smith Travel Research, based in Hendersonville, Tenn. Jan Freitag, vice president of Smith Travel, also presented data during the seminar along with Mark Woodworth, president of Atlanta-based PKF Hospitality Research.

Hoteliers are deeply concerned not only about occupancy rates, but also about room rates. Although the demand for hotel rooms is increasing, room rates are taking far longer to begin their recovery. “Demand is slowly creeping up. Trust the numbers,” Freitag urged beleaguered hotel industry listeners at the conference as he suggested strengthening room rates.

Smith Travel projects that rates and revenue per available room (RevPAR) will decline 3.2% this year before rising about 4.2% next year.

At the upper end of the market, Freitag notes that luxury hotels are selling more rooms than they did a year ago, which raises the question of whether the recovery, when it occurs, will happen from the top down, rather than from the economy segment upward.

During the depth of the current downturn, for every single hotel room rate increase, there were five rates that decreased, says Rubicon’s Swope. But the picture has brightened.

“As of March 1 of this year we have 1.75 rate increases for every rate decrease. That’s good news,” says Swope. “When we’re putting higher rates into the marketplace, it’s an indication that the hoteliers have greater confidence in overall demand.”

Although the news from industry experts was not a triumphant observation that occupancy and room rates have returned to 2007 levels, they cautiously tried to encourage the hoteliers that better days lie ahead. In the convoluted words of Freitag, “Things are getting less worse.”

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