U.S. Hotel Revenues Decline Narrows In August - But Room Rates Largely Held Steady
LOS ANGELES, Sept 10 - U.S. hotel revenues fell slightly in August after five months of slumping demand, according to analysts and preliminary data released on Monday, but room rates largely held steady and a feared price war did not break out in the nation's ailing hotel sector.
July and August are relatively slow months for business travel, which accounts for a majority of hotel revenues. September, when business travel traditionally picks up again, will be a more important test as to whether the worst is past for the sector, industry watchers said.
The 2 percent to 4 percent August drop in revenues per available room, or revpar, the industry benchmark, came as the average occupancy rate for U.S. hotels fell by a similar percentage, according to data tracking firm Smith Travel Research.
The parallel dips for revpar and occupancy rates meant that hotel operators were able to hold the average room price steady for the month, in contrast to a 1.1 percent decline in July, which had touched off expectations of a developing price war.
The August revpar numbers, while negative, also moderated a downtrend that began this spring. The August dip marked the fifth straight month of revpar declines -- the first such string since the depths of the recession in the early 1990s. But August was an improvement from the 6 percent dip reported in July.
Among individual market segments, the most expensive -- "upper upscale" hotels -- posted the biggest revpar decline, dropping between 9 percent and 11 percent as occupancy rates fell a more modest 4 percent to 6 percent.
Those numbers indicated that operators of the most expensive hotels continue to cut room prices in a bid to stem an ongoing erosion in occupancy rates.
Numbers for that segment also were in line with a similar forecast from Marriott International Inc.
J. Cogan, an analyst at Banc of America Securities, said the dropping prices at the highest-end hotels also bodes poorly for Marriott's two biggest competitors, Hilton Hotels Corp.
"Those numbers are in line with what we saw in July," Cogan said.
But the news was better for other market segments, where hotel companies were able to keep room prices at or above last year's levels.
Upscale hotels posted a revpar decline of 4 percent to 6 percent, equaling the drop in occupancy for the month.
The news was best for the lowest-end hotels, which often benefit as budget-conscious business and leisure travelers trade down their rooms to save money. Both mid-scale hotels without restaurant service and budget hotels posted revpar that was down 2 percent to flat compared with August last year, according to Smith Travel.
Still, Cogan said operators of lower end hotels will likely feel pressure to lower prices in the months ahead, as part of a trickle-down effect.
"There's evidence that consumers are traveling this summer, but only because (the hotel chains) are paying them to travel" by lowering prices, he said.