September 05, 2013

Why isn’t the hotel industry pushing rate more?


Data and statistical trends are behind every story at the annual STR Hotel Data Conference, and this year's discussions keep returning to some common themes--declining group business demand, revenue management and the age-old question: Why isn't the industry pushing rate more?

Adam Sacks, founder and president of Tourism Economics, led off a general session that set the stage for the current global economic picture and how hotel industry performance stacks up within it. His overall outlook was positive: He said that while global austerity measures continue to create some associated risk in the U.S. (dragging GDP growth back, Sacks said), other economic conditions keep travel health in balance.

Sacks acknowledged that the pace of growth in room demand will slow down, but international travel is one significant silver lining: "You can really see the dramatic effect international demand has had on the overall economy and on hotel performance," he said.

Jan Freitag, SVP of strategic development for STR, tempered Sacks' optimism: "RevPAR growth is not growing as quickly as it was before ... occupancy is slowing and we're not seeing room rate growth [as much]," he said. "The best is indeed behind us."

Freitag shared some macro supply and demand trends, particularly related to the group vs. transient question. "We're selling more rooms than ever [total group demand in 2013 so far is 2 percent lower than demand in 2007, he said] except group demand is still lower," he said. "Our data show that indeed group demand has not recovered."

Digging deeper, he pointed out that STR numbers show group demand in the "big box" convention hotels in major urban cities is in a downward slide, thus affecting group demand numbers nationwide. In contrast, he said transient demand is experiencing a large uptick yet ADR growth is "nonexistent" he said. "From an ADR perspective, transient growth is still way below where we were."

Get the full story at Hotel Management

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