Strong second-quarter hotel company earnings strengthened
the notion that buyers should brace for negotiated rate increases in 2012. Top
executives from Marriott International and Starwood Hotels and Resorts said
hotels are in a strong negotiating position this year, while Hyatt Hotels Corp.
executives said group rates are moving upward.
Both Marriott and Starwood indicated corporate transient
demand was strong during the second quarter. Marriott president and COO Arne
Sorenson said he expected "healthy rate growth" from negotiations.
"We'll have to see the way the economy develops,"
Sorenson said in an earnings conference call. "We've generally seen good
rate growth, but we still see special corporate rates that are down double
digits from peak levels."
During the second quarter, Marriott's corporate transient
occupancy rebounded to the peak levels seen in 2007. Group demand recovery also
continued during the quarter, particularly advance bookings, said Marriott CFO
Carl Berquist. Such bookings for later this year were up 18 percent year over
year, up 19 percent for 2012 and up 13 percent for 2013. Additionally, about
one-quarter of the group business booked during the second quarter was
scheduled to be held in 2014 or later, he said.
Rates at Marriott International properties increased by 3.3
percent year over year globally during the quarter. Rates were up by 3.1
percent in North America and by 5.8 percent in the rest of the world. Occupancy
increased by 2.1 percentage points globally to reach 72.4 percent, and
increased 2.4 percentage points in North America to 72.8 percent.
Similarly, Starwood reported its business transient revenues
were up 9 percent during the quarter. Occupancy across many of its brands was
hovering in the 70 percent range, and president and CEO Frits van Paasschen
projected "strong rate increases not just for the rest of this year, but
in corporate rate negotiations for next year. Supply is already tight, and
occupancies have reached the point where we expect rates to rise further."
Rates at Starwood properties globally increased by 7.4
percent year over year during the second quarter. Rate growth occurred in all
regions and was most significant in Europe, (16.9 percent) and Latin America
(8.6 percent). Rate growth was lowest in North America (4.8 percent), although
occupancy in the region was the highest of all global regions.
Rates at Starwood's Luxury Collection and St. Regis
increased by 11.5 percent globally, the largest hike among its brands. Rates
were up 10 percent at W properties, up 9.4 percent at Le Meridien properties,
up 6.7 percent at Westin properties and up 5.8 percent at Sheraton properties.
Hyatt CFO Harmit Singh said revenues from the company's
transient business were up 6 percent during the quarter, both from increased
demand and rates. Group rates negotiated during the quarter also were trending
higher, he said. Group business booked during the quarter for the quarter was
up 13 percent year over year, and group business booked for the rest of the
year was up 8 percent, he said.
"There is still some uncertainty," Singh said.
"Bookings are tentative, and windows continue to be short."
Second-quarter average daily rates across Hyatt Hotels Corp.
properties globally increased 4.6 percent year over year, the company reported.
In North America, rates at full-service properties were up 2.2 percent and
select-service rates increased 3.2 percent. Outside of North America, rates
were up 10.2 percent during the quarter.
Hyatt reported full-service occupancy in North America was
up 1.8 percentage points to 75.2 percent, while select-service occupancy
increased by 4.6 percentage points to 78.3 percent. Occupancy outside of North
America changed little year over year, down 0.1 percentage points to 64.7
percent.
Rates during the quarter also increased, though by a lesser
extent, at hotel companies operating mostly in the midprice and economy tiers.
At Choice Hotels International, rates increased by 2 percent
year over year during the quarter. Rates were up between 1 percent and 5
percent in all Choice brands but Clarion, where rates fell 1.7 percent for the
quarter. Occupancy at Choice properties increased by 2.3 percentage points to
54.1 percent during the quarter and was up across all brands.
Average daily rates at Wyndham Worldwide Corp. hotels
increased by 3.8 percent year over year during the quarter. In particular,
rates increased at the upscale Wyndham brand and the midprice Wingate and
Ramada brands, although rates decreased slightly at some of the company's
economy brands during the quarter. Overall occupancy increased by 2.8
percentage points to 53 percent at the company's hotels.
In the United States, overall hotel rates increased by 3.5
percent during the quarter, according to STR. U.S. occupancy reached 63.4
percent during the quarter, up 4.5 percent from the prior year.