Hotel & Motel Management - April 21, 2008 - (Page 16)

16 Trends & Stats H&MM April 21, 2008 | HotelMotel.com www.HotelMotel.com/digital_edition Steady demand helps drive luxury rates, occupancy IN THE details Luxury withstands market changes ADR nearly $300 Strong RevPAR growth Weekend nights up Luxury hotels – Key performance indicators percent change full year 2004 - 2007 12 2004 8 2005 7.7 5.6 5.1 3.6 2.7 2.0 0.0 11.8 11.2 10.2 2006 2007 9.6 By Jan Freitag H&MM Columnist T he notion that luxury hotels in the United States can command premium average rates becomes stronger when one considers that while 2 percent of all roomnights sold are in the luxury hotel segment, 6 percent of the industry’s room revenue is generated by the category. Furthermore, as the average daily rate in 2007 across the entire U.S. lodging industry surpassed $100 for the ﬁrst time ($103.64), the ADR for the luxury segment in 2007 was nearly three times that amount ($292.65). It appears that luxury hotel operators can charge premium rates regardless of market conditions. The room rate increases during the last three years have been nothing short of staggering. Each year since 2005, the room rate percentage increases have been at least double the rate of inﬂation, which annually was about 3 percent. The ADR increases, combined with healthy occupancy increases, provided double-digit percentage rises in revenue per available room for the three years leading up to 2007. Although RevPAR growth in 2007 didn’t reach double digits, the 7-percent increase provided lux- ury hoteliers with continued support to maintain average rates during 2008. The RevPAR growth slowdown in 2007 is expected to continue throughout 2008, but it should not be a dramatic drop. Occupancy rates in the luxury segment during 2007 were ﬂat at 71 percent—a drastic increase from the 62.8 percent achieved just ﬁve years earlier in 2002. Occupancy has remained strong, despite the segment adding nearly 500,000 roomnights since 2002. These high occupancies seem to support that the demand for luxury guestrooms is inelastic. The luxury traveler does not seem to make decisions based solely on price; attributes such as location and amenity levels also appear to be key drivers in the decision-making process. One interesting and unexpected trend observed during 2007 was the day-ofthe-week occupancy pattern. The trends reﬂect that the business focus of most luxury properties is aimed at the high occupancy mid-week nights, but the highest occupancy actually is achieved on Saturday night. The use of resorts and city hotels as mini-vacations or long-weekend destinations appears to have fueled this shift. The trend began following 9/11, when people began rethinking how they wanted to spend time with their loved ones and therefore chose shorter getaways. Perhaps the most revealing ﬁgure for the luxury segment is the $297 average rate on Sunday nights during 2007. Historically, mid-week and Saturday nights have been the leading ADR nights for luxury hotels, but Sunday night has moved to the forefront—despite the dramatically lower occupancy rate. hmm@questex.com Jan Freitag is vice president of Smith Travel Research (www.smithtravelresearch.com). 7.3 4.8 7.0 7.0 4 2.4 0.0 3.5 2.7 3.6 0 Supply Demand Occupancy ADR RevPAR Luxury hotels ADR ($) and occupancy (%) full year 2007 300 250 200 150 100 62.8 63.9 67.2 69.6 71.0 71.0 ADR $224.58 Occupancy $249.66 $222.06 $232.67 $292.65 $273.52 50 0 2002 2003 2004 2005 2006 2007 Luxury hotels average occupancy by day of week (%) 2/2004 – 1/2007 80 73.3 74.9 73.1 72 75.2 70 68.3 60 59.0 57.2 50 2002 Sun. Mon. Tues. Wed. Thurs. Fri. Sat. Luxury chain scale vs. all other hotels rooms sold vs. room revenue full year 2007 Luxury All Other Rooms sold: 2% Room revenue: 6% Luxury hotels ADR ($) by day of week 2/2004 – 1/2007 280 $277 275 $271 $272 $270 $275 $276 $275 270 265 Rooms sold: 98% Room revenue: 94% 260 Sun. Total industry sold = 1 billion roomnights — Total industry room revenue = $107 billion Mon. Tues. Wed. Thurs. Fri. Sat. © 2007 Smith Travel Research http://HotelMotel.com http://www.HotelMotel.com/digital_edition http://www.smithtravelresearch.com

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Hotel & Motel Management - April 21, 2008 Contents Vista Affirms Fair Franchising Doctrine HOTEC Panel Explores Green Procurement Spa Revenue Drives Overall Profitability Perspective Legal FAQ Sales Clinic Travel Trends Guest Column Trends & Stats Owners and Operators Feel Pressure to Switch to HD Protect and Clean Stone Floors Coffee On Demand Fitness Equipment Experts Weigh New Builds Vs. Conversions Transactions Ad/Edit Index Marketplace Classifieds Checking Out

Hotel & Motel Management - April 21, 2008

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