Summer 2012 Looks Very Strong for U.S. Hotels

If hotel performance during the United States Memorial Day weekend is any indication, the country’s hoteliers should expect strong returns this summer.

The May 25-28 weekend—a bellwether for performance in June, July and August—saw strong gains in average daily rate and revenue per available room over comparable weekdays last year, according to STR, parent company of HotelNewsNow.com.

US hotel performance Memorial Day weekend* (2012 vs. 2011)

Friday Saturday Sunday Monday
Occupancy 4.6% 3.3% 3.4% 3.5%
ADR 5.1% 5.1% 4.7% 4.6%
RevPAR 9.9% 8.6% 8.2% 8.2%

*Values show percent changes for the comparable days of week in 2012 versus those in 2011
Source: STR

“It’s really the unofficial start of the summer season,” said Bill Sutherland, VP of travel services for U.S. motorist group AAA. “Typically the Memorial Day weekend … is fairly consistent with what will happen in the summer.”  In this case, he said that consistency will spell great things for the U.S. hotel industry.

Indeed, data from TravelClick shows ADR for June is up versus this time last year. The outlook is even stronger for the July to September period, during which ADR is up 7.5%.   Demand in July and August is up 21.3% and 21.6%, respectively, the company reported.

“Summer is looking quite strong,” said Tim Hart, TravelClick’s executive VP. “We’re seeing occupancy up in June about 6%, in July about 8% and up over 12% in August. That’s probably—at the far reaches of the summer in August—that’s probably more explained by group than it is yet by transient because it’s still a bit early in the transient booking curve, but there’s still quite healthy transient demand building for that period as well.”

STR in early May forecasted occupancy growth of 1.8%, ADR growth of 3.9% and RevPAR growth of 5.7% for the U.S. hotel industry.

Even on the individual company level, the summer outlook is strong. Best Western International’s advanced summer bookings are up 21% from Memorial Day through Labor Day compared to 2011, a spokesperson told HotelNewsNow.com.

Mark Van Amerongen, senior VP of operations at Prism Hotels & Resorts, said, “We’re pacing ahead of last year.” The Dallas-based management company operates 52 properties across 13 brands throughout the country.  “The Memorial Day weekend, which is always kind of a bellwether … we were up a little over 8% in RevPAR at our comp hotels,” he added.

Executives at Chesapeake Hospitality, which manages 43 hotels, reported similar findings. “We’re actually expecting pretty positive (results), and that’s based on what we’re already seeing in the transient booking pace,” said Joseph Smith, executive VP at the Greenbelt, Maryland-based management company.

Leveraging demand
ADR might be projecting upward as the temperatures rise, but hoteliers still are reporting a slow haul when it comes to pushing rate.

“Unfortunately, we ‘re still in a world where as much as you try you’re somewhat either handicapped or held in check by your comp set and what they’re doing,” Smith said. “While I’ve never believed that rate increases demand, the fact of the matter is that even though I want to raise my rates and have them high, if everybody else in my comp set isn’t moving with me, I’ve got to do what I have to do to stay competitive.”

It’s easier to do in some markets than others, Van Amerongen said.  “We’re starting to see in certain markets over certain timeframes where we can push rate because of some very good demand patterns,” he said.

The top performing cities based on reservations on the books for the period between 1 June and 31 August were Charlotte, North Carolina (committed occupancy was up 35.7%), Tampa, Florida (+34.2%), Houston (+24%), Miami (+13.9%) and Indianapolis (+11.5%), according to TravelClick.

The team at Prism is attempting to push rate through value-add packages, Van Amerongen said. At the Holiday Inn Select Denver Cherry Creek, for example, operators are bundling a two-night stay with two tickets to a nearby waterpark. And at the Hilton San Francisco Financial District, buddies can enjoy the “Bromantic Package,” which bundles a guestroom for two with a six-pack of Budweiser beer and a discounted round of golf at Presidio Golf Course.

Sutherland at AAA said travelers continue to be in tune with price and value. “If I’m going to still spend X amount of dollars for my travel going forward, I want to make sure I’m getting more than I had in the past for that same amount of money,” he said.

Jitters and shakes
Recent stock market volatility, coupled with uncertainty overseas, has yet to cloud the summer outlook, sources said.

“Despite all the uncertainty in the economic environment, there’s still a lot of bullishness among the traveling public in terms of at least the spend they have on travel, so I think there’s some consumer confidence there,” TravelClick’s Hart said.

The macroeconomic environment has been so “consistently inconsistent for so long,” Smith said, that travelers are not getting deterred by an occasional hiccup in the market.

For their part, leisure travelers are taking longer trips further away from home, Sutherland said. It is no longer an issue of “pent-up demand,” he said. “Travelers are going to travel.”

“The leisure traveler was really not there as much last year in 2011, but in 2012 it’s really been a part of the growth,” Hart said.

Van Amerongen said more guests staying within the Prism portfolio are taking multi-leg trips. Instead of just visiting Chicago for a long weekend, he said by way of example, travelers are first visiting St. Louis or a few tertiary markets before spending time in the Windy City.

On the corporate side, stays are being booked for more nights and further in advance, he said.  “We’re seeing a lot of our larger corporate clients, other than hiring internal, using more contractors and consultants and project teams, which tends to mean there’s folks coming in from outside the local area,” Van Amerongen said.

“Unless something drastic were to happen that would cause cancellations, I think we’re set for a pretty good summer,” Smith added.

BLOGGER’S NOTE: This is a June 11, 2012 article from one of our best on-line industry sources, HotelNewsNow.com.   I edited it down for our blog, so my apologies to the original authors.

Dave Hogg

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