Hotel & Motel Management - May 19, 2008 - (Page 26)

26 Trends & Stats H&MM May 19, 2008 | HotelMotel.com www.HotelMotel.com/digital_edition Economy segment sees signiﬁcant boost in supply IN THE details Segment withstands pressure New products announced Supply above average Leisure travelers might trade down Chain scales supply/demand percent change 12 months ended February 10 Supply Demand 5 2.3 2.3 1.8 2.0 4.5 3.3 4.2 3.1 2.3 1.8 By Bobby Bowers H&MM Columnist T he economy segment holds a solid place in the U.S. lodging industry, accounting for about onequarter of chain-afﬁliated hotel rooms (about 748,000 guestrooms) and capturing 11 percent of chain room revenue. The segment’s ability to withstand pricing pressure from higher segments in a challenging economic climate is evident in the accompanying charts. The economy segment’s somewhatlimited supply growth over the past few years may be due, in part, to new hotel prototypes in the midscale-without-foodand-beverage segment targeted for secondary and tertiary markets. The economy segment’s cost-effectiveness for developers and owners traditionally had been partly attributable to cost savings created by the exterior corridor conﬁguration of many hotels. However, with the decreasing popularity of exterior corridor properties among consumers—largely because of security concerns—the economy segment offered developers limited options to compete with the new midscale product offerings. But change is in the air for economy hotels. Several leading chains have announced fresh, new product concepts. During 2007, the segment achieved a net increase of nearly 16,000 guestrooms (236 properties). Of these rooms, about 45 percent were new construction and 65 percent were net conversion gains into the segment. Two chains—Value Place and Microtel—accounted for more than 70 percent of the new-construction rooms added to the segment in 2007. During the 12 months ended February 2008, economy segment supply grew 2.3 percent—the same amount as the luxury segment—while demand grew 1.8 percent. Economy supply growth was above the industry average, possibly indicating the segment has turned the corner. The segment’s average daily rate was $53.94 for the 12 months ended February. Economy ADR growth has maintained its premium over occupancy growth, which is in step with the industry. Economy products tend to be more leisure oriented. Based on currently available data, it appears the U.S. lodging industry’s slowdown is being led by leisure travelers rather than business travelers. That could affect the economy segment in two ways. The positive effect could be that leisure travelers will trade down from more expensive segments and seek more cost-effective economy lodging. The negative effect could be that leisure travelers stay home altogether. Occupancy appears to be soft in the economy segment, and that bears a close watch. The economy segment currently has about 10,000 guestrooms under construction—about 12 percent of the overall industry’s rooms under construction. That’s also about 30 percent higher than it was at the same time in 2007. New guestrooms under construction bode well for a segment that is ready to serve valueconscience guests. hmm@questex.com Bobby Bowers is senior vice president of operations for Hendersonville, Tenn.-based Smith Travel Research. 0 -2.7 -5 Luxury Upperupscale Upscale -3.5 Midscale w/F&B Midscale w/o F&B Economy Chain scales occupancy percent 12 months ended February 80 70.9 71.2 69.1 65.2 58.9 56.7 70 60 50 40 Luxury Upperupscale Upscale Midscale w/F&B Midscale w/o F&B Economy Total U.S. rooms under construction by scale in thousands February 2008 60 50 40 30 20 10 0 Luxury Upperupscale Upscale Midscale w/F&B Midscale w/o F&B Economy Unafﬁliated 56.0 46.7 42.2 26.9 7.5 9.5 9.4 Economy occupancy/ADR percent change 12-month moving average to February 2008 8 6 4 2 0 -2 -4 -6 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Occupancy % change ADR % change Economy supply/demand percent change 12-month moving average to February 2008 9 7 5 3 1 -1 -3 -5 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Supply % change Demand % change © 2008 Smith Travel Research http://HotelMotel.com http://www.HotelMotel.com/digital_edition

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Hotel & Motel Management - May 12, 2008 Contents Hotelier of the Year Leads Team to Victory Sheraton Builds on International Success Slower, Smaller Transactions in First Quarter Perspective Legal FAQ What Women Want Sales Clinic AAHOA Update Franchise Law Family Business Travel Trends Guest Column HotelWorld Update Trends & Stats Cleaning and Maintenance H&MM's 2008 Franchising Fees Guide FACs Evolve to Meet Brand, Owner Needs The Importance of Branding When Buying Ad/Editorial Index Marketplace Classifieds Checking Out

Hotel & Motel Management - May 19, 2008

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