Third-quarter earnings by multibrand hotel companies added
evidence that a long-awaited recovery in the lodging industry is underway,
illustrated by upper upscale hoteliers' general agreement on a forecast of high
single-digit percentage increases for corporate negotiated hotel rates in 2011.
Starwood Hotels & Resorts Worldwide executives in late
October told analysts that occupancy levels are surpassing those from 2007,
higher-yielding corporate customers are displacing leisure customers and group
business in 2011 could recover to match 2008 performance. Revenue metrics,
including average daily rate, trended higher during the third quarter versus a
year earlier.
"The lodging recovery continues unabated by the Euro
crisis, U.S. economic jitters or malaise in Japan," said CEO Frits van
Paasschen during an Oct. 28 conference call. "With occupancy rising at or
above 2007 levels, it's no surprise rates are in positive territory. Corporate
buyers know that occupancy levels have already risen toward prior peaks,
especially in gateway cities."
Explaining the pursuit of top-line growth, hotel group
president Matthew Avril cited "improvements in our revenue management
system" and noted how the company has "reallocated sales resources to
better align our organization with how our clients want to do business with us
and to free up resources to prospect for new accounts."
Earlier in the month, Marriott International reported that
corporate demand rebounded by 27 percent year over year during the third
quarter, which Marriott executives said would give them leverage to boost 2011
corporate rates.
For the quarter, overall rates in North America were up 1.7
percent year over year, and rates in Marriott's full-service and luxury
properties increased by 2.6 percent. Globally, rates were up 1.8 percent. As
such, revenue per available room was up by 8.2 percent globally and by 7.2
percent in North America.
With the boost in business travel, Marriott cut back on
discounting and pushed its corporate earnings up by 9 percent in North America
during the quarter, according to Marriott chairman and CEO J.W. Marriott Jr.
In 2011, Marriott expects overall corporate rates to be up
in the high single digits. Part of that will come from new, higher-paying
corporate business, but the company also is pushing for increases in current
negotiations.
On the group side, Starwood's van Paasschen said, "2011
bookings are picking up nicely, and group business in 2011 could match 2008.
This also lays to rest any fears that technology or the downturn itself would
permanently change group demand."
According to Starwood CFO Vasant Prabhu, "In North
America, September was the strongest group booking month of the year,
indicating the companies continue to be willing to make commitments for future
years."
Group and transient business travel together account for
about 75 percent of Starwood's overall business.
Overall, with the exception of Europe, the Middle East and
Africa, third-quarter average daily rate at Starwood properties increased
across all regions year over year. Rates increased by 3.9 percent in North
America, by 10.1 percent in Asia-Pacific and by 6.9 percent in Latin America.
Occupancy increased across all regions except for Africa and
the Middle East, where it was flat. Global occupancy for the quarter was 69.7
percent, up 4.7 percent from 2009.
Revenue per available room increased by 10.6 percent in
North America and by 10 percent globally.
Wyndham Hotel Group reported an 11 percent increase in
third-quarter revenues to $203 million, thanks to higher revenue per available
room, franchise fees and ancillary service fees from its 7,150 hotels.
For the quarter, RevPAR was up 6.7 percent compared with
last year. Parent company Wyndham Worldwide's CEO Stephen Holmes told investors
that the RevPAR improvement resulted from "broad-based occupancy gains,"
but added that rates also began to stabilize during the quarter.
Choice Hotels International reported that its rates in the quarter
were flat. Rates were slightly up at Comfort Inn but down across the rest of
the company's midprice brands. Choice's extended stay properties had the
largest rate drops, down 3.7 percent from the third quarter of 2009.
Occupancy and revenue per available room, however, were up
across all brands.
Choice president and CEO Stephen Joyce said in his company's
earnings call that corporate travel would boost Choice's recovery, as
corporations both are putting travelers back on the road and seeking lower-cost
properties. However, he said the company is "still a ways from the point
in time where we'll see pricing power from demand that allows us to yield
higher rates across the board."
This report appears in
the Nov. 8 issue of Business Travel News.