In this exclusive video interview, STR's Mark Lomanno presents the research firm's revised year-end 2009 and 2010 outlooks, while giving a first look at its 2011 forecast for the U.S. hotel industry.
Travel industry experts who were gathered at IHG’s Americas Investors & Leadership Conference last week provided a sober look at the factors affecting recovery for the hotel industry. “There is no question that the worst is behind us; where we were a year ago in terms of financial stress, we’re through it,” said Adam Sacks, managing director of Tourism Economics, a division of Oxford Economics. “… But there’s been a lot of damage done. The recovery that we are in the midst of is a fragile one.”
Starwood Hotels & Resorts Worldwide Inc.'s third-quarter earnings fell 65% amid slumping consumer demand, though results topped expectations. The operator of the W Hotels, Westin, St. Regis and Sheraton hotel brands also raised its 2009 earnings estimate to 67 cents to 71 cents a share from its twice-reduced view, most recently at 65 cents. Fourth-quarter earnings are seen at 17 cents to 21 cents; analysts' average estimate was 21 cents, according to a survey by Thomson Reuters.
So far, we’ve seen two weeks of daily numbers in October, and it’s safe to say there’s good news on the horizon. The first week, 27 September through 3 October (week No. 35 of 2009), there were positive signs. Ten of the top 25 markets experienced occupancy growth for the week (see below). Transient occupancy percent change was positive for the total U.S. (4.9 percent), as well as the luxury (8.8) and upper upscale (6.5) groups. Seven of the nine regions experienced transient occupancy growth, as well as the urban location group (5.6 percent).
The first eight months of 2009 have been financially tough for hotel properties in Aspen and Snowmass Village, and in Vail and Beaver Creek. Three key measures of a hotel's performance - occupancy, average daily rate, and revenue per available room - were all down sharply in the two combined resorts through the first eight months of 2009 compared to 2008, according to Smith Travel Research of Nashville, Tenn.
Among the chain-scale segments, the luxury segment was the only one to end the week without a decline in all three key metrics, reporting a 0.7-percent increase in occupancy to 62.1 percent for the week ending 3 October, according to Smith Travel Research. Overall, in year-over-year measurements, the industry’s occupancy fell 5.8 percent to end the week at 55.8 percent. Average daily rate dropped 8.3 percent to finish the week at US$95.51. Revenue per available room for the week decreased 13.7 percent to finish at US$53.30.
PKF Hospitality Research's Mark Woodworth shared his outlook for the U.S. hotel industry during the closing session of the Hotel Data Conference. Despite a bumpy a road ahead, the U.S. hotel industry will recover, according to leaders from some of the top research firms in the country.
When you think of STR’s top U.S. hotel markets, New York is one that always comes to mind. It’s generally thought of as having strong occupancies and high rates, in good times and in bad. Because this current economic crisis is affecting everyone across the board, we’re going to see how the New York market has been affected and to what extent. It’s no surprise New York consistently has brought in rates well above US$200 for the past couple of years, but it’s unexpected how much of a rate premium it has within the top 25 markets. In the chart below, we’ve analyzed data on a 12-month moving average starting in 2002. Throughout the past six years, the smallest premium New York had on the top 25 markets was US$69.66 in September 2003, and it has only gone up from there.
Because its pricing model and amenity package offer higher value for longer-length-of-stay customers, extended-stay hotels were better positioned to weather the downturn, theoretically. But that doesn’t appear to be the case at first glance. The extended-stay segment declined more in occupancy than the rest of the U.S. hotel industry during the first quarter of 2009, resulting in a 22-percent revenue-per-available-room decline versus the total industry’s 18-percent decline. However, when looking at the demand, supply and room revenue data, a clearer, much better picture of the extended-stay segment appears.
According to a new consumer survey on hotels released by leading global market research firm Synovate, one in ten people globally will only stay at a hotel if it has a green policy, more than half of all travelers like to try new hotels and Americans feel that the hotel toiletries are ‘part of the experience’. Sheri Lambert, Synovate's U.S. Senior Vice President for Travel & Leisure research, said the company undertook the survey to explore how people find and select the hotels they stay in, and how important certain hotel features are to them. “Ask any regular traveler and you can almost guarantee they will have a hotel-from-hell story and (hopefully) a hotel-from-heaven counterpart. Whether people are travelling for pleasure or business, the place where they park their head at night can make or break the experience.”