Despite being a major hub for corporate business travel in
the United States, Atlanta has been a relative bargain for travel buyers—even
more so in 2011.
Overall 2011 average daily business travel costs in the
nation's ninth-largest metropolitan area by population dropped by 2.8 percent,
according to the Corporate Travel Index, making Atlanta the 33rd most expensive
U.S. city, down from 22nd the prior year. The average daily corporate rate at
Atlanta hotels was down 7.2 percent, ranking the market 46th among the 100
cities in the index, compared with 29th last year. That places it barely above
such smaller cities as Mobile, Ala., and Charleston, W. Va. Atlanta's average
2011 car rental rate, meanwhile, dropped by 9.4 percent.
Atlanta is home to one of the country's largest convention
centers and a metro area with more Fortune
500 company headquarters than all but three other U.S. cities, according to
STR. As such, business transient and group travel are driving forces.
Even as those segments recovered, Atlanta's 2011 hotel
occupancy ran just below 60 percent last year, compared with a long-term
average of 63 percent, according to PKF Hospitality Research. Some hoteliers
are puzzled.
"Atlanta is a little bit of a mystery to me," said
Jack Horne, senior vice president of sales for Hyatt Hotels Corp., whose
company is in the final phase of a $65 million renovation at its landmark Hyatt
Regency in downtown Atlanta. "It's got a sensational airport that's really
close to the city, decent weather and is really reasonable to go to. I don't
know why it hasn't been a little more booming than it is."
Part of that is due to a vast increase in supply in recent
years. Several high-profile luxury and business-travel-friendly select-service
hotels opened from 2007 through 2010, boosting room inventory by more than 20
percent, according to Mike Brophy, managing director of U.S. Hotel Appraisals'
consulting and valuation office in Atlanta. Additionally, large events booked
at favorable rates for buyers at the beginning of the economic downturn
continue to depress the city's average hotel rate.
Atlanta's three major hotel markets include downtown, the
area near the airport and the ritzy Buckhead district, which is among the most
affluent neighborhoods in the nation. Horne said hotel build-up there and in
other exterior markets has siphoned away some of the business that
traditionally went downtown. Atlanta's Midtown neighborhood, just north of
downtown, also has seen significant development in recent years, including a
414-room Loews hotel that opened in 2010.
"The downtown Atlanta market has been a little soft in
terms of transient business," Horne said. "We do better on the
transient side out in Buckhead. I don't know whether it's the restaurant scene,
but there's a lot more going on there." Competition from nearby group
markets, including New Orleans and Nashville, somewhat has hurt demand, he
added.
But buyers soon could find Atlanta costs picking up. As in
most of the rest of the country, the city's hotel development boom is over;
hotel room supply this year is projected to increase only by 0.2 percent.
Hoteliers reported increased attendance and bookings for events in the early
part of this year, and companies headquartered in Atlanta have began hiring and
expanding, according to Brophy.
According to American Express, corporate hotel rates
negotiated for 2012 increased by 3 percent year over year. PKF projects that
Atlanta's overall average daily rate, including both corporate and leisure
travel, will increase by 4.1 percent this year after remaining nearly flat last
year. In the following years, that could accelerate.
"Stronger growth should resume with renewed economic
stability in 2013 and 2014," Brophy wrote in a 2011 report on Atlanta. "No
new supply is expected for several years in any of Atlanta's submarkets, which
should further help existing hoteliers push rates."
This report
originally appeared in the March 19, 2012, edition of Business Travel News.