With the first quarter of 2011 almost complete, the positive outlook for the year is gaining traction. In the wake of recent disasters, natural and manmade, we know there is no such thing as certainty in our industry. Even so, we can’t help but be encouraged by the continuing positive direction.
At the end of February, total occupancy for the upcoming 12 months is up 3.7 percent year-over-year. This must be considered in the context of a downturn in pace over the same time period last year, now at -4.4 percent (a shift from last month’s observation at 9.3 percent). Nevertheless, occupancy is improving for the year despite the deceleration. Occupancy and pace metrics are more pronounced in the group segment, with commitments up by 4.7 percent year-over-year, but with a decline in pace of 12.9 percent.
Average daily rate (ADR) is growing at 3 percent year-over-year for the whole year of 2011, inclusive of months now completed. Strengthening ADR is largely coming from the transient segment, at 4.1 percent, but it is important to recognize that group ADR has now turned positive, at a 0.7 percent gain. At this juncture, the ADR trend is on a continued positive path for the year.
Hotels with seasonal activity may be wondering what’s in store for the summer months. As the overall metrics for the year are considered it is important to note that business travel in the first quarter showed a sharp year-over-year improvement at a 14 percent gain in occupancy, and a 9.3 percent jump in pace for stays associated with negotiated rates. At the same time, the discount segment, composed largely of reservations coming from leisure travelers, declined 9.5 percent in occupancy and showed a drop in pace of 10.9 percent. To achieve success, hoteliers must (more than ever) attract seasonal vacation guests with the right combination of rates, fencing, and value-added components, while ensuring that cannibalization of high-value corporate business does not occur. Employing the right strategies for managing business mix, even granularly within the transient segment, will be a key factor in winning the RevPAR game for 2011.
As most North American hoteliers breathe a collective sigh of relief, reassured that 2011 shows no sign of repeating a dismal 2010 performance, Gulf Coast hoteliers anxiously watch as room commitments for the summer season begin to build. Will guests return to the once-again pristine beaches, following the 2010 oil spill cleanup? Or will long-time repeat visitors who reluctantly found alternative destinations last year now decide to stick with their new-found resort locales?
A sample of advance booking activity for 30 hotels from the Florida Panhandle delivers less-than-encouraging news. While advance commitments for July remain flat relative to both 2009 and 2010, advance reservations (as of March 1) have dropped year-over-year by 5 percent and 20 percent for stay dates in May and June, respectively, and plummeted by 50 percent for the month of August. Florida Panhandle resort destinations make roughly 60 percent of their annual revenue from the four-month high season between May 1 and August 31*. For this reason, even a modest drop in this time period can have devastating effects on hotels.
Can we conclude that the lower advance commitments are residual effects of the oil spill? Not so fast. Other leisure beach markets are also struggling. For example, Myrtle Beach, S.C., currently shows flat year-over-year commitments for May and June, and drops of 12 percent and 17 percent for July and August, respectively. A factor in the advance booking decline in the Florida Panhandle may be continued belt-tightening across the leisure market, the compressed booking window, or a combination of the two.
We will continue monitoring summer occupancy and rates and report back to you next month.
Christine DeZarn is enterprise solutions manager at Rubicon, a Travelclick Company, www.therubicongroup.com.