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US hotel industry recession enters new rate erosion phase

September 02, 2009 | Hospitality Industry

During week of June 27, the drop off entered a dangerous new phase – when compared to the same week, year over year, the national hotel average room rate began to fall more rapidly on a percentage basis than the average hotel occupancy percentage. This trend has now continued over the past eight weeks.

Reeling from a sharp falloff in corporate, group and leisure travel demand as a result of the global financial crisis, hotel occupancies have been falling and hoteliers throughout the nation have been responding by lowering room rates to retain customers and shift share from competitors.
Tracking the Average Daily Rate (ADR), Average Occupancy Percentage (Occ%) and Revenue per Available Room (RevPAR), based on weekly statistics published by Smith Travel Research (STR), over the last several years provides some insight into the how the recession is developing and the challenges that will face hotel owners and operators when a recovery begins to develop.
The US hotel industry is highly seasonal and some industry observers have mistakenly interpreted a June uptick in booking volumes as a signal that a bottom may have been reached and that if a recovery was not around the corner, at least the bleeding had subsided. Unfortunately, based on a review of 12-month moving averages, I cannot share that opinion. All three indicators, ADR, Occ% and RevPAR, on a 12-month moving average basis, have continued the slide that began months ago.

Get the full story at Gerson Lehrman Group

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