2009 will likely rank as one of the worst years for the United States hospitality industry in modern history. Reeling from a sharp falloff in corporate, group and leisure travel demand as a result of the global financial crisis, hotel occupancies have been falling and hoteliers throughout the nation have been responding by lowering room rates to retain customers and shift share from competitors. The week of June 27, this drop off entered a dangerous new phase – when compared to the same week, year over year, the national hotel average room rate began to fall more rapidly on a percentage basis than the average hotel occupancy percentage. This trend has now continued over the past four weeks.
photo credit: purpleslogHotel average rates are falling faster than occupancy rates - this could get ugly
Tracking the Average Daily Rate (ADR), Average Occupancy Percentage (Occ%) and Revenue per Available Room (RevPAR), based on weekly statistics published by Smith Travel Research (STR), over the last several years provides some insight into the how the recession is developing and the challenges that will face hotel owners and operators when a recovery begins to develop.
The US hotel industry is highly seasonal and some industry observers have mistakenly interpreted a June uptick in booking volumes as a signal that a bottom may have been reached and that if a recovery was not around the corner, at least the bleeding had subsided. Unfortunately, based on a review of 12-month moving averages, I cannot share that opinion. All three indicators, ADR, Occ% and RevPAR, on a 12-month moving average basis, have continued the slide that began months ago. continue reading →
