Hotel & Motel Management - January 19, 2009 - (Page 30)

H&MM January 19, 2009 | HotelMotel.com 30 Trends & Stats BY JAN FREITAG “It seems economy properties are consciously holding their rates rather than cutting them.” Economy supply/demand: 12-month moving average to October 2008 9 7 Percent change 5 3 1 -1 -3 -5 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Supply Demand s the general economic conditions worsen, the economy segment seems to be getting hit harder than other segments in some respects, but other measurements show it is faring better. The economy chain scale occupancy rate decreased 4.1 percent year to date as of October 2008, which partially is a function of the 2.1-percent increase in supply for the segment. Following the drop in other macroeconomic indicators, occupancy performance was worse in September and October than earlier in 2008. TAKEAWAY In contrast, total U.S. industry The end of 2008 brought lower occupancy performance occupancy, slowed YTD was down ADR growth and 3.4 percent, so the smaller decreases in RevPAR for the performance of economy segment. economy hotels lagged behind the performance of the industry as a whole. When examining YTD data, the economy segment in the U.S. has performed similar to the midscalewith-food-and-beverage segment. For instance, occupancy was 56.3 percent YTD in the economy chain scale, while the midscale-with-F&B segment saw a 58.4 percent occupancy rate for the same period. Industry average daily rate growth is attributable to gains in the midscale segment, which are keeping pace with the rate of inﬂation. The economy segment’s ADR growth is lagging YTD (with only a 1.4-percent increase), but in October the segment outperformed the nation. While the economy chain scale saw a similar deterioration in occupancy, it held rates steady (up 0.3 percent). Being able to hold rate as occupancies wane might be an indicator that the state of affairs is not quite as dire in the economy segment as for other chain scales. In any case, it seems economy properties are consciously holding their rates rather than cutting them. Revenue per available room percent decrease in the economy segment is again similar to the RevPAR decrease of midscale properties (down 5.9 percent). The decrease in the month of October, however, is the smallest decrease across all chain scales. Smaller RevPAR drops in late ’08 for economy hotels A YTD economy hotels registered the worst performance with a 2.7-percent RevPAR decrease, but for the month of October this scale was the best performer with “only” a 5.5-percent decrease. When we take a look at economy hotels in urban locations, we see the rate increases were reported with a comparatively strong 4.1 percent in October YTD, which might speak to continuing pricing power in urban areas. Heading into a rougher operating environment this winter with deteriorating demand, we would expect to see urban travelers trade down when choosing lodging establishments, which will give economy properties opportunities to ﬁrm up pricing. For now, however, urban economy properties reported a 3-percent decrease in demand for October YTD, which was more drastic than all urban properties, as they saw a positive 0.3-percent change in demand for the same period. The general performance picture for economy properties at interstate/ highway locations is not rosy. Supply is up 1.2 percent, but demand decreased 3.8 percent for October YTD. ADR, however, increased 1.7 percent for October and 2.3 percent for October YTD. The October data for all interstate hotels seems to suggest there still is some pricing power for properties near highways—across all scales—and economy properties are indicative of that. Overall, interstate markets aren’t growing as quickly as all other locations: Supply growth was only 1.2 percent for October YTD, versus 2.5 percent for the nation. As the continuing ﬁnancial crisis takes its toll on the properties in the pipeline, we will continue to monitor the new supply situation for the economy segment. Leisure travelers will continue to make ends meet, so hotels in the economy segment could be the preferred accommodation of choice and hopefully the pricing picture will reﬂect that trend going forward. hmm@questex.com Economy occupancy/ADR: 12-month moving average to October 2008 8 6 Percent change 4 2 0 -2 -4 -6 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Occupancy ADR Chain scale occupancy/ADR: October 2008 YTD 8 6 Percent change 4 2 0 -2 -4 -6 -8 Luxury Upperupscale Upscale Midscale w/F&B Midscale w/o F&B Economy -2.6 -3.6 -4.6 -2.7 -4.0 -4.1 -0.1 2.1 1.9 Occupancy ADR 3.6 3.9 1.4 Chain scale occupancy: October 2008 YTD 80 70 Percentage 60 50 40 Luxury Upperupscale Upscale Midscale w/F&B Midscale w/o F&B Economy 70.4 71.3 69.4 64.9 58.4 56.3 Jan Freitag is vice president of Smith Travel Research (www.smithtravelresearch.com). © 2009 Smith Travel Research http://www.HotelMotel.com http://www.smithtravelresearch.com

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Hotel & Motel Management - January 19, 2009 Contents Select Inn First in Vista's Buying Plans Danzinger Chosen for Round 2 at Wyndham Perspective Energy Star Update Legally Speaking Consultant's Corner Sales Clinic Travel Trends Franchise Law Family Business Cornell Insights HotelWorld Update Transactions Careful Marketing is Key for Timeshare Debt Market Slow for Most Transactions Trends & Stats Proper Mix of Uses Leads to Profitable Partnerships Card Check, Employee Retention Big Issues for CEOs Locking Systems Televisions Fitness Centers/Spas Mattresses Ad/Editorial Index Marketplace Checking Out

Hotel & Motel Management - January 19, 2009

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