Hotel Occupancy On The Rise, But Rates Still In Decline

Occupancy rebounded for large, multibrand hotel companies in the first quarter of 2010, but rate declines continued across the tiers.

Marriott International reported an uptick in group travel, particularly association business, during the quarter. President and COO Arne Sorenson said group room nights within Marriott were up 1 percent compared with the first quarter of 2009, but up 10 percent in the last month of the quarter. "While corporate business remains soft, association meeting attendance took off," Sorenson said. "Association room nights rose 15 percent in the quarter and 50 percent in our third period."

Marriott chairman and CEO J.W. Marriott Jr. said business travel improved worldwide in the quarter, and corporate room nights in North America were 16 percent higher than in the first quarter of 2009.

"While first-quarter room rates were generally lower than last year, as occupancy levels continue to improve, we see higher room rates on the horizon," according to Marriott. "In fact, we anticipate that North American systemwide revenue per available room will increase by 3 percent to 6 percent for the full year 2010 with higher room rates by year-end."

Marriott said strong demand in Europe, South America and Asia will boost RevPAR levels outside North America higher.

For the first quarter, RevPAR was about flat compared with last year, slightly down in North America but up internationally, Marriott said. Rates continued to decline in the quarter, particularly in full-service and luxury hotels in North America, which saw rates decline 7.8 percent compared with 2009. Rates internationally were down 4.5 percent.

Occupancy at Hyatt Hotel Corp.'s 369 hotels rose year over year by 5.8 percentage points to 64.4 percent during the quarter. Occupancy growth was particularly strong in North American select service properties—Hyatt Place and Summerfield Suites—and internationally, up 8.7 percentage points and 8 percentage points, respectively.

Hyatt president and CEO Mark Hoplamazian said most markets in North America reported occupancy increases. "We have begun to see greater group booking activity, but we continue to have limited visibility on future bookings due to short lead times and smaller-sized bookings," he said.

Hoplamazian told investors performance was particularly strong in the Europe, the Middle East and Africa and Asia/Pacific regions. Internationally, average daily rate increased by 3.6 percent compared with the first quarter of 2009, though it was a 4.3 percent decrease in constant dollars. Rates in North America continued to decline, however, down 7.9 percent in full-service and 10.7 percent in select-service brands.

Starwood Hotels & Resorts reported that worldwide revenue per available room increased 6.3 percent during the quarter, while RevPAR in North America increased by 2.8 percent. Occupancy increased by 6 percent globally to 57.1 percent and was up in every region except Latin America. North America occupancy increased by 5.8 percent compared with the first quarter of 2009.

Starwood's W and St. Regis/Luxury Collection brands showed the largest occupancy gains in the quarter, up 14.9 and 8.2 percent, respectively. "Lodging demand for our nine global brands accelerated as we moved through the first quarter, allowing us to beat expectations on robust, top-line growth," Starwood CEO Frits van Paasschen said. "Most encouraging for us were occupancy gains led by the luxury market."

Average daily rates were down 2.6 percent globally, with the exception of Four Points by Sheraton, which reported a slight increase in rates. In North America, most brands saw rates decrease by more than 5 percent—the St. Regis/Luxury Collection drop was the highest at 13.4 percent—but Le Meridien reported a slight increase. Internationally, rates held steady and rose for the Westin and Four Points brands.

Wyndham Worldwide reported a $10 million year-over-year decline in revenue for its hotel group, caused by a 6.8 percent drop in systemwide RevPAR. The drops were much lower than the company forecast of a 10 percent to 13 percent decline in RevPAR, however. Wyndham CFO Tom Conforti said he is "cautiously optimistic that we have seen the worst of the RevPAR declines."