Business Travelers Boosting Hotel Occupancy, Rate

Hoteliers were upbeat about their businesses and the return of the business traveler as they kicked off the 26th Annual New York University Hospitality Investment Conference today.

"Things are looking better," Jonathan Tisch, Loews Hotels president and CEO and chairman of the conference for the past 10 years, said. "It looks like the first time in years business travel is up."

Randy Smith, president of Smith Travel Research, delivered data that backed that assertion. Smith presented a day-of-the-week analysis that showed a significant rise in Monday through Thursday hotel room bookings. The rebound in occupancy for those nights in 2003 and 2004 has been as steep as the declines had been for 2001 and 2002. "One is a mirror image of the other." He said demand growth had exceeded expectations and spiked to 4.3 percent, largely propelled by the recovery in business travel.

He said demand overall for 2004, based on May year-to-date data, would rise 4 percent on 64 percent occupancy, yielding a 2.4 percent increase in average daily rate and a 5.2 percent increase in RevPar. "Room rate increases will start to surpass occupancy gains in the next six months," Smith said.

"The occupancy ramp up has been extraordinarily compressed," said Doug Geoga, president of Hyatt Hotels Corp. "To have rate growth this early in the recovery was a real surprise." He said rate movement particularly was dramatic in New York and San Francisco. "Rates are now up and will be in the third quarter," Geoga said, just in time to affect annual corporate negotiations.

Tisch said he expected "more heated discussions than in years past."

InterContinental Hotels Group CEO Richard North said Asia is doing much better and that "the U.K. market is as vibrant as the U.S., but in Western Europe the jury is still out." North said that rate won't be the only outcome of higher occupancy. "As recovery strengthens and occupancy gets stronger, lead times for meetings will lengthen," he said, noting that lead times in New York were now three to four months out.

Further underscoring the return of the business traveler, hotel property valuation expert Stephen Rushmore, president of HVS International, forecast the most positive changes in the value of hotels per room over the next couple of years for gateway cities. The cities he singled out included New York, Washington, D.C., Los Angeles, Miami, San Francisco and Seattle.