Meeting News - December 15, 2008 - (Page 14)

Hotels & Resorts Hotel market continued from cover ber, in the wake of the Wall Street crisis. It now forecasts that hotels will average 58.3 percent occupancy for 2009—the lowest in 20 years. Also, room supply is increasing. PKF-HR expects 275,000 new rooms to come on line in 2008 and 2009. Over the past few years, bullish developers, credit lenders, and hotel companies—which saw steady profitability increases and in 2007 posted their best year ever ($28 billion in profits, according to the American Hotel & Lodging Association)—fueled much of the oncoming expansion. Now, “with supply and demand moving in opposite directions, the typical hotel manager will not be able to maintain aggressive room rates,” said Woodworth. The market has undergone a fundamental shift, said John Hach, a senior executive at TravelClick, a hotel intelligence and marketing firm based in Chicago, adding that some major markets saw doubledigit occupancy declines in October. The balance of power in group contract negotiations will shift back to buyers for the first time since 2003, according to Bjorn Hanson, the former hospitality research leader at PricewaterhouseCoopers and now an associate professor at New York University. Hanson said the rates for conventions, conferences, and meetings negotiated in fall 2007 or earlier have buoyed hotels’ average daily rates, but rates secured in 2008 were lower, as the negotiating dynamic began to swing in buyers’ favor. While this would presumably place meeting planners in a good negotiating position, other factors, such as corporate budget slashing, will nonetheless conspire to make their jobs difficult. What’s more, the window of supplier-side weakness will begin to close by 2010, experts said. Still, with the current state of affairs, hotels will almost certainly not be able to increase rates at all— as nearly half of them were still able to do in 2008, despite lower occupancy versus 2007—while many will have to cut their rates to some degree, said Jan Freitag,VP of Smith Travel Research, in an October webinar hosted by Hospitality Sales & Marketing International. Alternatively, “we are suggesting that hotels provide more value rather than simply play with rates,” said Freitag, in an interview with MeetingNews. “Offering items such as free breakfast, free Internet access, free bottled water, free newspapers, or waiving the resort fee would be preferable options.” Yet, Freitag admitted it is unlikely that hotels can hold rates. Indeed, there already has been a wide-scale roll out of value packages even by luxury suppliers, and a countless number have slashed rates. continued on page 63 www.meetingnews.com 14 MeetingNews December 15, 2008 http://www.3-2-1connect.com http://www.3-2-1connect.com http://www.meetingnews.com

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Meeting News - December 15, 2008

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