Multibrand hotel companies are reporting significant year-over-year drops in rates and revenue for the second quarter of 2009, as industry analysts continue to move their expectations for the year downward.
Smith Travel Research in July said drops in U.S. hotel industry room rates and revenues would be deeper than expected in 2009 and that moderate declines would continue through 2010.
The firm now projects that average daily rates will drop by 9.7 percent in 2009, and revenue per available room will be down 17.1 percent year-over-year. In April, it forecast a RevPAR drop of 9.8 percent and a rate drop of 3.6 percent
(BTNonline, April 28).STR said occupancy will drop 8.4 percent to 55.4 percent this year, slightly down from the rate of 56.5 percent it forecast in April.
Recent earnings reports by major hotel companies support those expectations.
Starwood Hotels & Resorts on July 23 reported that systemwide RevPAR dropped 27.7 percent for the quarter. International properties took the biggest hit, with RevPAR dropping 30.6 percent compared with North America's drop of 25.4 percent. Swine flu concerns cost the company about $10 million in revenue during the quarter, said Starwood CEO Frits van Paasschen.
Average daily rates for the quarter dropped by 18.4 percent worldwide. Luxury and upper upscale brands saw the steepest drops, with Le Meridien down 22.2 percent, St. Regis and the Luxury Collection 24 percent, and W 25.9 percent.
Occupancy for the quarter was down 8.1 percent worldwide. Most brands saw occupancy drops within a few percentage points of that level with the exception of W, which had an occupancy drop of only 4.4 percent.
Earlier in July, Marriott International reported more than a 20 percent decline in revenue per available room and double-digit percentage rate drops for its upper-tier properties in North America during the second quarter. Compared with the second quarter of 2008, worldwide RevPAR fell by 23.6 percent systemwide. A mixture of the economy and swine flu concern hit hotels outside of North America particularly hard, as international company-operated RevPAR was down 31.5 percent and average daily rate down 22.3 percent for the quarter. In North America, systemwide RevPAR was down 21.2 percent.
The company's upper upscale and luxury brands suffered the steepest occupancy and rate declines. The Ritz-Carlton brand in North America saw its RevPAR drop by 31.4 percent, its occupancy by 13.9 percent and its rate by 16.1 percent. The Marriott, Renaissance and Courtyard brands also saw rates fall by double-digit percentages. Rates were down by 12.6 percent.
Marriott president and COO Arne Sorenson said room nights sold to corporate travelers were down 18 percent for the quarter and event cancellations subsided, but attrition continued to worsen, lowering group RevPAR 25 percent.
Both transient and group leisure travel, however, were up for the quarter. "It's still too soon to say we're seeing green shoots," he said, "but to take the analogy further, at least we have some evidence that the planting season is not too far off."
For the full year, Marriott now expects RevPAR to decline in the 17 percent to 20 percent range both in North America and internationally, in line with Smith Travel Research's projections.
In 2010, drops in all three metrics will continue, STR said. It forecasts rates to drop 3.4 percent, occupancy by 0.3 percent and RevPAR by 3.7 percent.
A rebound of group travel will be the key to the lodging industry's recovery, said STR president Mark Lomanno. Group business will have to return to about 90 percent to 95 percent of its levels prior to the downturn, which will in turn generate transient demand, before hotels once again gain any pricing leverage, he said.
"On an inflation-adjusted basis, it's probably going to be longer than six years before the rates get back to 2007 levels," Lomanno said. "Absent some other event, it looks like we're bouncing along the bottom."