IHG, Hilton and Marriott will likely dominate the US landscape for upscale and upper midscale hotel lodging development over the next decade. This is one of the pieces of information reported from the 2011 STR Hotel Data Conference in Nashville this month.

U.S. Hotel Pipeline

The hotel industry calls new hotels in development and construction the “hotel pipeline”. The hotel pipeline is currently led by three hotel chains:

• Hilton Worldwide
• InterContinental Hotels Group
• Marriott International

These three hotel chains represent 13 of the top 15 hotel brands in the pipeline for new hotels coming to hotel loyalty members in these programs.

Which brands are building new hotels?is the Hotel News Now article showing the current U.S. Hotel Pipeline top 15 brands.

The data from the HNN article was used here to create the graphic below showing the top growing brands in the U.S. I added hotel chain, size and market segment data to the HNN pipeline data.

*Rooms pipeline data from STR U.S. Hotel Pipeline July 2011 Hotel News Now graphic.

Tough economic times have given large hotel chains the ability to grow even larger as banks look to name brands as better investments than independent hotel projects.

What does this mean for the loyalty traveler?

The growth of IHG, Hilton and Marriott will outpace Starwood and Hyatt in the coming years. These three hotel chains are each racing to 5,000 hotels globally. Choice and Wyndham are already over 5,000 hotels with their midscale and economy chain brands.

The complaint that Starwood (1,050 hotels) and Hyatt (450 hotels), as the two smaller upscale and upper-upscale hotel chains with major hotel loyalty programs, do not have sufficient geographical coverage for frequent guests will likely continue to be debated as the super hotel brands of IHG, Hilton and Marriott continue to experience rapid growth. Another decade might see five or six hotel loyalty programs in the 10,000 hotels club for loyalty travelers around the world.

The good news for frequent guests in the short term is I think SPG and Hyatt Gold Passport will maintain high value promotions to be competitive in the upscale and upper-upscale hotel market segment.

SPG obviously targets its loyalty efforts around its American Express credit card but then throws out a great promotion like the recent “Three stays earn a free resort night”.

Hyatt Gold Passport is currently in a transitional phase as it recently repositioned its credit card with a membership anniversary free night offer and additional benefits for top level Diamond elites and benefits that attempt to match or exceed Starwood Preferred Guest.

Road trips across the western states this summer revealed to me Marriott’s Fairfield Inn brand has grown significantly in recent years. There were new build Fairfield Inn properties in many of the roadside towns I visited.

Hampton Inn and Holiday Inn Express open new hotels around the U.S. every week.

La Quinta is a brand that I have never frequented, but I sure saw plenty of these hotels around the western U.S. La Quinta Inns & Suites are 800 hotels in a midscale brand almost twice as large as the Hyatt chain in the U.S. There are more La Quinta Hotels in the U.S. than Starwood Hotels.

STR Hotel Data Conference

STR is Smith Travel Research out of Hendersonville, Tennessee.  Hotel News Now provides digital news from STR and the hotel industry. There were several good reports from the Hotel Data Conference published on HNN and the rest of this Loyalty Traveler post shares some of the interesting information to me along with my commentary.

Hotel brands vs. independent hotels - Hotel News Now

• 1990 = U.S. hotels 57% branded. Branded means hotels like Hilton Garden Inn and Marriott Courtyard where the hotel is affiliated with a major hotel brand (and typically a hotel loyalty program with benefits).
• 2011 = 70% branded hotels in U.S.
• Independent boutique hotels tend to be higher priced than chain boutique hotels, but the prevalence of independent boutique hotels in Manhattan may skew the data. Boutique hotels are undergoing soft branding with new affiliations of independent hotels with major brands like Marriott’s Autograph Collection, IHG InterContinental Alliance Resorts, Choice Hotels Ascend Collection and Starwood Luxury Collection.
• Resort Hotels in chains tend to be higher priced than independent resorts. Loyalty points redemption is the consumer advantage here for high priced resorts.

Online Travel Agencies (like Expedia, Orbitz) cost U.S. hotels $2.5 billion in 2010 - Hotel News Now

• $2.5 billion is based on the number of U.S. hotel rooms sold on OTAs in 2010 and assumes the additional revenue that would have been generated by hotels if these rooms had been sold through direct hotel channels. This study looked at nearly 25,000 hotels in nearly 100 brands.
• 10% of hotel rooms in U.S. booked through OTAs.
• 17% of hotel rooms booked online directly with hotel brand’s websites. For example a Hilton brand hotel booked through one of Hilton’s websites.
• 13.7% of hotel rooms booked via telephone and central reservations system of hotel brand.
• 7.9% booked through GDS (travel agent systems).
• The article doesn’t state where the other 50% of room bookings come from.

One of the more significant findings for the consumer is data indicating that increasing market share taken by OTAs reduces the room rate for hotels. OTAs have increased their market share from 1.34% of total hotel industry revenue in 2001 to 7.35% in 2010.

Four outside influences impacting the hotel industry – Hotel News Now

1. Airplanes are 22% more full today than five years ago and operating near capacity in U.S.  Business travel recovered, but leisure travel has not. Air travelers are also to a large degree hotel guests. Airlines pulled airplanes out of service while hotel rooms still being added to system.
2. Hotel guest satisfaction is down in 2011 according to JD Power North America Hotel Guest Satisfaction Index Study released last month. Guest satisfaction scores are higher when guests have breakfast at the hotel. (My wife kept talking about how great the Holiday Inn Express breakfast was after two stays last month. I found it amusing since she has not stayed in the HIX brand frequently enough to grow tired of the same food at 2,000 different hotels.) The survey indicates guests recognize the rise in hotel rates over the past year. And they also recognize the decline in staffing level since 2008 and absence of room renovation and material replacement. The decline in staff has seemed more of an issue to me in 2011 as hotels are more crowded. Overall I think room quality and hotel improvements are being addressed from what I have seen in my stays in 2011, except for a small number of hotels I visited. San Francisco is one of the strongest markets in the U.S. and I feel 2011 rates priced me right out of the city again like it was back in 2008 before the economic meltdown took hotel rates cascading down like Yosemite Falls  (San Francisco 2011 rates commonly over $200 for hotels that were under $140 much of 2009-10). The DOW has dropped more than 500 points while I am writing this morning and that is down 15%  in two weeks. San Francisco might be affordable again by November!
3. Business travel has come back and the hotel industry will follow. Funny how two weeks can change the global outlook as the world stock markets have shed hundreds of billions in U.S dollar value today, and trillions of investment worth in the past two weeks since this presentation at the Hotel Data Conference. Will the double dip recession take hold before the close of the year and lead to business travel decline again?
4. Online booking effect should grow by 10% year-to-year. Business travel has picked up, but travelers are still waiting and booking rooms at short notice. My Loyalty Traveler research over the past couple of years showed that rates San Francisco typically dropped with the lowest rates offered 3 to 14 days before arrival. I’ve noticed a different pattern in 2011 with rates lower at two weeks, but typically higher within one week of arrival. Another development is there have been more hotels available for last minute booking through offers like Starwood Starpicks, IHG Last Minute Rewards and Marriott weekend discount rates (available by email subscription).

Adding Google Hotel Finder to the mix – Hotel News Now

I admit that I never checked out Google Hotel Finder before today.

I like it.

The site allows the user to set an area on a map to search hotels. Results display hotels and the hotel room rate compared to the average rate for that property with a percentage above or below average.

The complaint from the hotel industry is the rates shown on Google Hotel Finder do not necessarily represent the rates on the hotel brand’s website.

Loyalty Traveler points out frequently that rates shown on OTAs are the Best Available flexible rate or Advance Purchase rates, but OTAs do not show AAA discount rates, senior rates, corporate rates and some special brand website online discounts.

This means the rate shown on Google Hotel Finder might be higher than what you can find on the hotel brand’s website. The fact that the rate might be higher is a common issue for all branded hotels so this is not too much of a concern.  Google Hotel maps indicates where the good deals might be and then the consumer can check the hotel brand website for even better discounts.

Google Hotel Finder showing Monterey, California

I’ll try to write up a more comprehensive review of Google Hotel Finder next week.

Hyatt Gold Passport and Marriott Rewards elite members may find a surprise awaiting that discount hotel stay booked as part of a travel package or through an opaque site like Priceline or Hotwire.  Hyatt and Marriott elite members report recognition in terms of club lounge access and free breakfast even though the hotel was booked through Expedia, Travelocity, Orbitz, Priceline or some other online travel agency (OTA).

Hyatt Diamonds may not be getting a suite upgrade on a Priceline booking, but you may receive Welcome Amenity points and you may earn points on other charges to your room.

Marriott Rewards members state receiving access to the hotel Club Lounge and Club Level rooms and earning points on incidental spend.

I was upgraded to a suite and lounge access at a Hilton Hotel one time when I was HHonors Diamond on a Priceline stay.

Register Your Hotel Loyalty Membership Number to OTA Bookings

Add you hotel loyalty membership number to any third party hotel reservation after your booking is confirmed by the OTA. Call the hotel, email, or take time at the check-in desk to register your hotel membership number to the reservation.

There is nothing to lose and high potential for gain when your hotel stay receives some loyalty recognition during your stay like a room upgrade, breakfast and internet, even if no elite stay credit is earned for the third party OTA booking.

The End of the OTA Merchant Model

Most hotel loyalty programs do not recognize loyalty members who book through third-party online travel agencies (OTA) due to the high cost of distribution for the hotel owners with the OTA Merchant Model.

I read an article this morning by Max Starkov – “End of the OTA merchant model – this time for real” providing some numbers on the OTA Merchant Model.

The data cites 20% to 25% room rate as a typical fee for the hotel to sell a room via an OTA.

For example: Expedia sells a room for $100. The room is also selling for $100 on the hotel’s own websites. Expedia makes $25 when it sells the room. The hotel loses on a room it did not sell directly to the guest. The hotel loses about 90% of that $25 Expedia gained through an indirect sale.

Seems to me consumer logic would indicate more hotel guests would like the added value of hotel points, free breakfast, internet and other amenities provided when booking sufficient volume through a specific loyalty program to earn elite membership and its value-added perks.

Comparing straight room rates for any specific major brand hotel, the hotel websites sell the room for the same price as an OTA like Expedia and Travelocity.  Hotel websites offer Best Rate Guarantee terms to provide an additional discount or benefit if a lower rate than the hotel sites low rate is found on an OTA site elsewhere.

Yet, hotels have seen the OTA share of bookings for the top 30 hotel brands rise from 25.4% in Q3-2008 to 37.5% in Q3-2010. This has occurred in the past two years while hotel loyalty programs have been offering the most rewarding loyalty incentives in years.  The proportion of people booking hotel rooms outside the hotel’s own websites has risen despite offers for free nights and huge points bonuses through hotel loyalty programs.

So are consumers ignorant to the value of hotel loyalty programs as hotel guests or are they really getting incredible savings with OTA bookings?

Travel packages where the hotel is bundled with a car or flight and opaque sites like Priceline and Hotwire where the hotel is not known until booked are popular as other cheaper options than published room rates. Bidding database forum sites like BetterBidding.com and BiddingforTravel.com can assist you in narrowing the likely hotels you will book into when submitting a successful bid for a hotel room on an opaque site like Priceline.

OTA indirect booking  v. Hotel site direct booking

The tide of OTA popularity during the period of extraordinarily low hotel rates in 2009 and 2010 may keep rising and make trouble for hotels seeking to push rates higher and faster in 2011.

Enjoy elite benefits on your third-party bookings when you get them. The economics of hotel booking channels make this a highly generous practice as a common courtesy for their elite loyalty program members at Hyatt and Marriott hotels.

My only experience this year with an OTA booking for a major hotel brand was a Hyatt Place Orlando Airport booking that Gold Passport refused to recognize as a Best Rate Guarantee valid claim even though I booked the hotel for $90 less than the Hyatt website wanted. I was a bit grumpy on arrival at missing out on a hotel stay credit in what I still feel was a wrongfully denied BRG claim, but that feeling quickly dissipated when I entered the hotel lobby to find free food and beer in a hotel happy hour.

Please share your experiences with hotel loyalty elite status and third-party OTA bookings.

Did you receive elite recognition and benefits?

FlyerTalk – Marriott Benefits on OTA Stays

FlyerTalk – Hyatt Benefits on OTA Stays

Anarchy Loyalty in the U.K.

Cornell Panel talks distribution management, customer loyalty (Nov 16)

Expedia on how to grow your ADR without impacting occupancy (Nov 29)

The Hotel Data Conference was held this past week at Loews Vanderbilt Hotel in Nashville. One of the headlines from the conference caught my attention with –  

“Hoteliers could be leaving as much as US$50 on the table by not charging guests what they expect to pay.” 

The statement is based on a presentation by Nate Fristoe and the RRC Associates Travel Intentions Survey which showed U.S. leisure travelers late last year had expected to pay $294 per night for a luxury hotel in January to June 2010. The rate paid for a luxury hotel night during this time period was actually $244 per night.

The conclusion appears to be that hoteliers could have charged an extra $50 per night for their hotel rooms and consumers would have accepted those rates.

Really now? 

The last two luxury hotels I stayed in received an extra $5 of that $50 on the table when I needed to purchase coffee in the morning. Luxury hotels are the only hotels I have stayed in the past year where there was no complimentary coffee service in the hotel lobby. And often the complimentary coffee in luxury hotels is so discreetly placed that you need to ask where to find this freebie, if available. 

The RRC Associates data showed leisure travel price gaps for all market segments from economy to luxury hotels with the smallest gap in the midscale hotel market at $106 expected rate vs. $87 actual rate. Surprisingly to me is economy hotel rates were the next biggest consumer-seller gap with leisure travelers anticipating rates of $86 per night for the first half of 2010, but actual spending came to just $49 per night for a $37 room rate gap. 

Upscale hotels showed a $33 gap from $161 expected to $128 actual rate paid.

So does this mean hoteliers will be raising rates rapidly in the latter half of 2010? 

Some markets like New York City appear to be pushing the rate ceiling skyward again with room rates jumping more than 10% in the past year. Rate increases on average are still confined to a few hot spots in the U.S.

Consumer sentiment is still low as we finish out the 2010 year.  Another finding by RCC Associates Travel Intentions Survey is leisure travelers clearly consider room price the most critical factor (44%) when choosing a hotel. Loyalty programs came in distant second with 16% of respondents citing this as a factor in choosing a hotel.

Luxury Hotels are making a big comeback in occupancy and price rate increases in 2010, but is that attributable to the lower, and might I say more reasonable pricing for luxury hotels this past year?   

The consumer optimism of six months ago has taken a hit as the economic recovery stalls for working Americans and travel plan expectations diminish. Destination Analysts, Inc published their report in July, “The State of the American Traveler” (pdf) with the headline “Leisure Travel Outlook Weakens”.

My September column for InsideFlyer used data from that report to argue that hotel recovery without a recovery in the economic conditions for the vast majority of leisure travelers makes rapidly rising hotel rates a move that will drive millions of Americans to downsize hotel market class segments to cheaper rate segments – luxury to upper-upscale; upper-upscale to upscale; midscale to economy – or even move away from hotels altogether.

“Glamping” seems to be the 2010 replacement for hotel staycation. Google search glamping!

I wonder how the Economy sector of hotels will survive low rates in the $50 range while the upscale and luxury segments of hotels push hard to bring rates up at a more rapid pace. The divide in hotel rates and economic classes may mirror the widening American income gap between the wage class and wealthy class.

The economy sector of hotels is still losing rate pricing ability in the latter half of 2010 while luxury and upper-upscale hotels are geared to test the rate increase waters in the last half of 2010.

Can luxury hotels continue to fill rooms and maintain occupancy in 2011 with higher rates?

In early 2009 the industry analysts were saying 2010 would be the year when hotels would come out of the rate doldrums. By late 2009 the forecasts were more subdued. Now in August 2010 the industry is predicting a better 2010 end-of-year forecast with 2011 forecast to be even better.

The lackluster hotel loyalty promotions going into the fall 2010 season leave me wondering if hoteliers will see a drop in occupancy when rates go up and hotel loyalty promotions drop out.

I still have my doubts on a U.S. hotel recovery in 2011.

Smith Travel Research in Hendersonville, TN is one of the leading hotel industry data reporters.  Last week the company published its 2010 hotel industry forecast. In the first month of 2010 the company is predicting hotel occupancy will remain flat in 2010 and finish the year at 55.1%. This is after an 8.7% drop in 2009. On average, across the U.S. hotels will go through 2010 just more than half-full.

A consequence of low occupancy is continued lower room rates. STR predicts the average rate of a hotel room will decrease another 3.3% this year to finish 2010 at US$94.39 per night. The average daily rate for U.S. hotel rooms fell over the 2009 year to $97.51, an 8.8% drop . (STR source)

Sure, you will still see $400 per night for many New York City hotels, but you will also see $35 per night rates at some Comfort Inns and Knights Inns around the country. And even those typically $400 a night luxury hotels will likely have rooms in the $200 range in many locations when travelers are not filling $400 per night rooms.

A luxury hotel takes five years or more to go from planning to opening. 2010 will see a large number of luxury hotels opening in the U.S. that looked like solid investments when they were initially planned way back in the boom of 2005. Demand is expected to pick up in 2010, led by the luxury and upper-upscale hotel market and business and leisure travelers. Unfortunately for the hotel industry, demand is expected to increase at the same percentage as new hotel rooms being added in 2010, 1.8% in the U.S.

This looks to be another year of unprecedented luxury hotel bargains. Grab them if you can as these deals may not be so readily available after 2010. 2009 was the most time I have spent in luxury hotels and the cost was less than I have ever landed luxury class hotels in my years of loyalty travel.

2009 was a tough year financially for the hotel industry, particularly in the U.S. The “great recession” of 2009 produced data harking back to the “great depression” of 1929. Mark Lomanno, president of STR, stated, “Good riddance to 2009, a year that we believe will go down as the worst in the modern hotel industry.”

I read the news today in the Irish Times, oh boy.

15,000 hotel rooms in Ireland need to close.

The Irish Hotels Federation report says 15,000 hotel rooms need “orderly elimination” and closures should begin before summer 2010 tourist season. Apparently, Ireland went on a hotel room building binge in the past ten years due to government tax incentives. Nearly 27,000 new rooms were built in the past decade doubling the hotel rooms in the country.

I spent the summers of 1997 and 1998 traveling around Ireland staying in B&Bs. There are thousands of B&B rooms around the country. The experience of staying in a family’s home is the kind of vacation that brings a tourist up close and personal to an Irish family. I liked the experience, but the intimacy of being with a family was also a catalyst for getting involved with hotel loyalty programs. I enjoy the anonymity and privacy of being a hotel guest.

Fáilte, tabhair cuairt ar Dhún na nGall

The item that touched me from the Irish Times article was reading the Ostan na Rosann Hotel closed this week and put 30 people out of work in Dungloe, Ireland. Kelley and I were at that hotel in July 1997. This is Enya and Clannad country on the northwestern coast of Ireland in County Donegal.

Please Note;

The Ostan na Rosann Hotel and Leisure centre is closed for the Winter.

I don’t recall if I was reading Let’s Go Ireland, Lonely Planet, or some early Ireland internet travel website in 1997 when the advice came that if a tourist wanted to see what was left of the real Ireland, then go where the fewest tourists visit and spend time in County Donegal, the northern most county of Ireland and mostly separated from the rest of Ireland by the Northern Ireland border.

We had been in Ireland about a week when we arrived in Dungloe. If you have a travel story to tell my wife Kelley about riding a bus through Central America or Southeast Asia with the locals, Kelley will reciprocate with a story of riding a Lough Swilly bus from Letterkenny to Dungloe with the locals.

During the days in Dungloe I hiked for miles around “The Rosses” in the early morning summer light. Alone, but never lonely walking in sunshine and showers, clouds constantly moving overhead and  changing the color shades of green and blue visible on the landscape and lakes. The smell of burning peat coming from the occasional farmhouse took me back to an earlier time; the gigantic wind turbines near Mt. Errigal a few miles away notwithstanding.  Walking in County Donegal was a step back to a pastoral time with just me, the sheep, and an occasional dog using the paths. I had it in my head to walk the entire coastline of Ireland over successive summers. That is an idea I might come back to one day.

Sheep in fields, County Donegal, Ireland

On the morning walk back through Dungloe I would stop at the bakery around 8:30 or 9am for sandwich breads. The baker questioned me every morning on why I was up so early while on vacation. He was one of the few people working this early in the morning. The streets remained fairly quiet each day until around 11am.

The west coast of County Donegal was a place where magic things happen, or speaking in more grounded terms “rather improbable coincidences” occur. (I just realized Clannad is playing on the TV music station as I am writing this. Coincidence of course.)

Dolmen in County Donegal provided shelter in a torrential rainstorm

One day while in Dungloe I talked Kelley into walking several miles to the Burtonport ferry for a ride over to Arranmore Island. We spent the afternoon visiting small pubs on the island, talking with a soccer star who looked like a gorgeous young Roger Daltrey, and receiving sage advice from an elderly publican on why “too much choice in America” is not necessarily a good thing.

Back on the mainland we stopped in a Burtonport pub and joined a crowd of Irish pub drinkers cheer on England for a couple of hours in a rugby battle with South Africa on the pub’s TV.  Irish criticism of England, which we commonly heard in the summer of 1997, seemed to be placed on the backburner when it came to sports and the Irish didn’t have a team in the match.

Turned out I had read the bus schedule incorrectly and the bus ride back to Dungloe I promised Kelley did not happen. We had to walk the miles back to Dungloe after the rugby game ended. In the middle of the fields there suddenly appeared a young Scotsman from Glasgow. He talked incessantly on the walk to town and we understood less than half of what he said. He had one difficult accent to comprehend. In a truly rural camaraderie gesture he offered an invitation for me to join him and his buds for drinking. He said they never had much money to drink, but a good punch-up made for great evening entertainment after the money was gone. I don’t know if he was serious or not, but a good punch-up was something I worked to avoid during our Irish pub crawls.

We ran into him again a week later at a crowded festival in Donegal town and we were able to spend time with him and three generations of his family in a crowded pub.  No punch-ups at the end of the evening. Those are the kind of travel memories that remain with you years later.

Magic in the beauty of stones

If you think being underwater $100,000 on your home mortgage is bad, imagine trying to sleep at night thinking about how your $400 million hotel investment has lost $100 million in value with the real estate crisis of the past two years.

The western playground of Scottsdale, Arizona has newly opened hotel properties like the InterContinental Montelucia and Starwood’s W Hotel Scottsdale sitting around waiting for foreclosure auctions.

So why are hotel loyalty programs being so generous?

And why are loyalty travelers so happy?

Hotel loyalty program bonus promotions have offered some of the most generous bonus incentives for frequent guests in years. Free night offers and bonus point offers are hard, fast, and repetitive, yet hotel occupancy and hotel room rates are still declining after a full year of unprecedented declines for the lodging industry.

Hotel loyalty programs are increasing the value of hotel points by offering repeated discounts on the cost of a free night using points. IHG Points & Cash; Marriott Rewards discount on PointSaver nights; Starwood Preferred Guest eliminating higher point peak season rates for 2009 on free nights using points at its high-end hotel Category 5, 6, and 7 properties.

Ironically, in the face of increased value for hotel points, Hilton HHonors has cut back on availability using Point Stretcher discount nights with HHonors points for 2009. A rumor spread on FlyerTalk in July stating HHonors Point Stretcher nights, free nights using points at a 40% discount, would be discontinued for 2009. In August, a Hilton HHonors posted a statement on its website stating Point Stretcher awards would be posted in September. It is now September 28 and there have been no hotels posted.

The message now simple states: Point Stretcher Dates are currently unavailable.

http://hhonors1.hilton.com/en_US/hh/rewards/pointstretcher.do

And occupancy levels are still declining and hotel rates continue to fall every month for the past year.

Hotel loyalty programs are repeatedly lowering the qualification requirements for hotel loyalty program elite status in 2009. Starwood, Marriott, and Hyatt offered double elite credit in 2009 promotions and Hilton will give most anyone a shot at Gold for 4 stays. IHG sells InterContinental Ambassador status and purchasing your way to Priority Club Platinum is a fairly easy task.

And occupancy levels are still declining around the US.

Hotel rates in the US have dropped nearly 10% in the past 12 months and some locations have posted 15% to 20% declines in room rates.

And occupancy levels are still declining around the US.

Why the next two months are important to watch for hotel industry indicator data.

A year has passed since the economic bubble burst bringing lower rates to the hotel industry. The industry is only projecting profitability to start improving in the latter part of 2010. The next two months may still show declines in occupancy and room rates and these will be based on the large declines in occupancy and rates from October and November 2008.

2009 snapshot of US hotel industry room rate and occupancy data.

December 2008

The occupancy and room rate declines were quite apparent a year ago in late 2008 when in the first week of December 2008 New York City occupancy had declined 9.2% from the same week in 2007 as room rates had fallen 14.9% over the year to average $348 per night. Rates had pushed $380 average by 2007.

In December 2008 PricewaterhouseCoopers predicted a 2% decline in US hotel demand for 2009 and a RevPAR decline of 5.8%. http://www.hotelmarketing.com/index.php/content/article/hotel_giants_seek_refuge_in_niches/

February 2009

February is the peak travel month of the year for Hawaii. In February 2009 the numbers showed a 12.4% room rate decline from 2008 with room rates dropping from $213.62 to $187.21. The room occupancy rate fell to 74.7%, its lowest level since the 1991 Gulf War. http://www.usatoday.com/travel/hotels/2009-04-06-hawaii-hotel-occupancy_N.htm

March 2009

Hotel Marketing published hotels.com findings in late March 2009 indicating New York City real room rates had dropped to $255, a 22% drop for the final quarter of 2008 compared to 2007. The data also stated real room rates were only 1% higher than January 2004.

http://www.hotelmarketing.com/index.php/content/print/global_hotel_prices_down_by_12_percent/

By mid-March 2009 the hotel industry forecast by PKF Hospitality Research (PKF-HR) called for hotel occupancy to drop 7.8% in 2009 across the US. The 6.4% predicted drop in average daily rate would designate 2009 as the greatest hotel rate decline since data was first tracked in 1932 by PKF-HR. Remember the forecast made in December 2008 by PwC was 2% occupancy decline for the year. The biggest plunge in hotel profits since the 1930s was predicted.

PKF predicts the greatest hotel rate discounting will occur in Summer 2009.

“In 2010, the vast majority of cities are still forecast to experience a decline in RevPAR for the year.  However, emerging signs of economic recovery are expected in many markets, and 14 cities across the U.S. will enjoy RevPAR increases over 2009.  Joining Anaheim and Minneapolis as the markets expected to lead the lodging industry recovery are the cities of Atlanta, Austin, Detroit, Oahu, Fort Worth, Raleigh, Chicago, Dallas, Nashville, Columbus, Albuquerque, and Houston.”

* March 2009 Hotel Horizons Report

http://www.hotelnewsnow.com/Articles.aspx?ArticleId=859&ArticleType=0&print=true

RevPAR is an indicator of hotel profitability. So did we seen signs of RevPAR declines in line with this forecast in the 6 months since the table was published?

New York RevPAR decreased 31.8% for August 2009. Nationally RevPAR decreased 19% for August 2009. Phoenix RevPar had decreased 25.8% by July 2009 according to STR compared to the PKF forecast of 20.5% for the year. These three indicators show more than a 5% negative variance on the figures in the table. The hotel industry is worse off than the March 2009 forecast.

April 2009

Smith Travel Research data for the first week of April  2009 showed Anaheim average room rates had dropped 17% to $107 per night. Chicago also listed above as a market recovery leader saw a 22% year-to-year drop in occupancy from April 2008 and a 24% average room rate decline to $111 per night.

http://www.hotelnewsnow.com/Articles.aspx?ArticleId=980&ArticleType=0&PageType=SameAuthor&print=true

At the end of April STR released a revised 2009 hotel industry forecast calling the first two quarters of 2009 to be the trough and relief emerging in the latter part of 2009. Year-end occupancy in US hotels was projected to decline 6.5% to 56.5%. The average daily room rate was projected to be down 3.6% to $102.89.

May 2009

Luxury Hotels Room Rates Drop

In late May 2009 STR’s Luxury Chain Scale, a composite of about 30 luxury and high-end hotel brands showed occupancy had declined 14.5% to 63.1% by April 2009 compared to April 2008. Room rates had fallen 16% to $249 per night across these hotel brands.

http://www.hotelnewsnow.com/articles.aspx?ArticleId=1259&PageType=Featured&ArticleType=1&print=true

June 2009

By June PKF revised its forecast to project falling room rates for the remainder of 2009, however, the rate declines would slow later in the year. Occupancy declines were still projected at 8.1% and room rate declines for the year were posted at 10.2% for 2009. Room rates were also predicted to fall another 3.3% in 2010.

http://www.btnonline.com/businesstravelnews/headlines/article_display.jsp?vnu_content_id=1003983721

STR released May 2009 data showing all 25 major hotel markets in the US saw year-over-year declines in average daily rates and occupancy. Oahu, Hawaii had the lowest occupancy decline of any major market at 4.9% drop.

Detroit, predicted by PKF to be a leading indicator of hotel market recovery in 2009, led the US in occupancy decline at -20% from May 2008. Houston and Dallas also cited by PKF as hotel recovery indicator markets had greater than 15% occupancy declines.

Nashville had the lowest decline in average room rate at just 4.1% to $91 per night.

STR June monthly data showed Minneapolis, Houston, Phoenix, and Detroit had seen the largest occupancy declines in the nation, each city with more than a 15% drop in guests. Three of these cities were cited as leading indicators for hotel market recovery by PKF in March 2009. New Orleans was the only major market to show slight gains in rates, yet still showed a slight decline in occupancy.

http://www.hotelnewsnow.com/Articles.aspx?ArticleId=1577

July 2009

In July STR came out with a summer 2009 forecast of the hotel industry indicating some stabilization may be in sight. STR’s revised forecast called for 2009 year-end occupancy to decline 8.4% and Average Daily Rate by 9.7% to $96.43. In the three months since the STR April forecast the ADR decline had jumped from 3.6% to 9.7% for 2009.

http://www.hotelnewsnow.com/Articles.aspx?ArticleId=1487&ArticleType=1&PageType=Todays&print=true

The STR data in July showed New York average room rates had dropped 26.6% to $180 per night. San Francisco (ADR $118), Oahu (ADR $180), Houston (ADR $86), and San Diego (ADR $124) had all seen room rates drop more than 15% over the course of the previous year.

September 2009 – The Current Situation in the US Hotel Industry

In September 2009 STR released a hotel industry forecast stating transient leisure growth was the recognizable trend. STR looks cautiously to leisure travelers continuing to spend in hotels and bring the hotel industry indicators into positive territory in November 2009.

Why are hotel loyalty programs being so generous? The leisure traveler is leading the recovery of the industry and hotel chains have a desire and an interest to retain leisure travelers.

STR monthly hotel data numbers for August 2009 shows occupancy declined 9.9% to 60.7% across the US. ADR has dropped 10.1% to $96.58 per night.

The US lodging markets with the lowest decreases in occupancy are Washington,D.C. (65.5%), Boston (74.1%), San Francisco (84.7%), Oahu (78.3%), and Tampa (48.2%). The other 20 major hotel markets had occupancy decreases in excess of 5% from August 2008 led by Detroit and Houston.

The average daily rate declined the most in Denver with a rate drop in excess of 30% to an ADR of $90 per night. New York (ADR $186), San Francisco (ADR $128), San Diego (ADR $131), and Minneapolis (ADR $92), all saw rates drop more than 15% in the past year.

http://www.hotelnewsnow.com/Articles.aspx?ArticleId=1914&ArticleType=38&PageType=STRPressRelease

Hotels and the Loyalty Traveler

Now in late 2009 we are looking at any further decline being weaker demand and rates on top of the steep hotel indicator drops from a year ago.

Loyalty travelers are loyal.

Hotels who offer a bargain to the loyalty traveler will see more frequent guests and those frequent guests will likely still be around when the group meetings resume and the general economy improves.

Happy loyalty travelers skimping to travel on the cheap in 2009 will find the way to hotels in hard times. Many of those same happy travelers will be high spending at hotels when times are better for the economics of hotels and the wallets of travelers.

That is why hotel loyalty programs are being so generous in 2009.

Coach Air Travelers to Pay for Premium-class Excess?

Joe Brancatelli has a great read from the Washington Post on the long term outlook for air travel.  He predicts the economics of premium cabin extreme makeovers these past few years will result in higher economy class fares for the leisure traveler coming soon as the profitable premium-class flyers dwindle.

When it comes to hotels the Early Bird gets Hosed

Sarah Nassauer had a piece in the Wall Street Journal March 31, “Travelers find it pays to wait for late deals”.  The article cites data from Travelocity’s senior editor, Genevieve Shaw Brown, indicating hotel guests received average room rates 20% lower within 30 days of travel compared to reservations made more than 60 days before travel.

My observations for San Francisco over the past year show the lowest rates typically occur between 7 and 14 days prior to travel for upscale San Francisco hotels.

Cool Hotel Websites

Adam Kirby, associate editor of Hotelsmag.com, had a visually stimulating piece “Web Designers Name Favorite Hotel Sites”.  I liked seeing what designers like in a web site.

I really do intend to put LoyaltyTraveler.com back online this year and I was looking for ideas.  The capital Catch-22 for a small business is you need money to make money. I’ve been in short supply.

Europe Hotel Rates Decline but Brits are Still Too Broke

The Telegraph, a British paper had an April 6 article by Charles Starmer-Smith “European Hotels Cut Rates” showing the steep decline in European hotel rates of 10% to 25% since November 2008. The impact of the Sterling’s value dropping 20% against the Euro during the same period means hotel rooms are still more expensive for Brits traveling to the continent.

Hawaii Hotel Rates Near Record Decline

USA Today published a piece by Jaymes Song, AP writer, “Hawaii Hotels have worst February in 18 Years”.  Hawaii had its worst hotel room occupancy for February in 18 years since Gulf War # 1. Apparently February is normally the busiest month of the year in Hawaii. Occupancy varies across the islands with Oahu doing the best at 78% and the Big Island Hawaii down to 64%.  Rates were down across the board, but after several years of huge annual increases the hotel rates are still no bargain. The average daily rate is still $187 per night after a 12% decline over the past year. 

Hotels are crying about revenue, but at Hawaii RevPar $140 in this downturn compared to $74 in late 2001, I say that still looks like some impressive growth – something like 10% per year average since 2001. I am not a hotel economist so perhaps the data is worse than it appears to me.

Does Priceline help the local economy?

Tom Belden had a piece in the Philadelphia Inquirer, “Winging It: Bad business climate means good hotel rates”. This article cites PKF Hospitality Research saying the decline in hotel profits, about 30% in 2009, will be the greatest one year decline since the 1930s. Interesting that the article mentions hotel stays as a frugal and civic minded way to help your local community. In the end the writer books a $65 Priceline stay at the Sheraton City Center. 

As Loyalty Traveler I advocate local hotel stays as a frugal and civic minded staycation strategy to reach elite status that pays off on the real out-of-town vacations.  But I advocate booking through the hotel’s website.  

Does Priceline help the local economy? I guess so, since the hotel guest will likely spend money at businesses in the vicinity of the hotel.  A direct booking with the hotel probably helps more.

Tim Winship  - Commandeering  the campaign for more frequent flier awards, temporarily at least

“Survey finds no improvement in frequent flyer awards” – Tim Winship

548 people have spoken to Smarter Travel and Frequentflier.com. Award tickets to Europe are easier to get these days. 

Apparently the frequent flier programs are lining up the miles for paying customers with all the ongoing double and triple elite miles offers. When it comes time to spend your miles earned from all those flights that made you an Executive-1KChairman-Platinum elite flyer, the airlines are still being stingy.

Tim thinks the airline’s are missing a great opportunity for customer relations by holding back award seat inventory in this economic climate.

Kimpton Hotels Had a Birthday and I missed it

Last week was a bad time to miss out on emails. I missed the Kimpton Hotels $81 sale .  The basic deal was $81 per night for a two-night stay at nearly any Kimpton. Reservations were accepted from Thursday April 2 to Sunday, April 6, 3pm Pacific time. By Saturday, April 4, two days into the sale there were few properties left.  There were still some rooms at three or four San Francisco Kimptons when I finally saw the Kimpton sale.  

Hilton HHonors announced their HHonors second quarter promotion for 1,000 points per night.

www.hiltonhhonors.com/1000bonuspoints The offer runs from April 13 to June 30 and registration is required.

On a Personal Note:

The past two weeks I have seen project deadlines, relative visitors, and the flu – first for K and then for me.

We did work in a stay at the Hyatt Highlands Inn in Carmel and had another wonderful visit in our wannabe home away from home where the mountains meet the sea. The irony was our stay in the Carmel Highlands was the only day with fog for the entire week. 

K started chemotherapy this week for her rectal cancer and I feel like I acquired “chemo brain”.  

Really – it is a published side effect of mental fog for cancer patients (and based on my experience chemo brain is contagious like the flu). Perhaps this week, now that the fog has temporarily lifted, I will get back to writing on hotel loyalty program developments.

Sunset view from Highlands Drive (above Hyatt Highlands Inn), Carmel, California

London average room rate in November 2008 dropped 5.6% to £130 per night from November 2007 rates.

For Americans, that comes out to $200USD per night at today’s exchange rate of $1.54 = £ 1.  That sounds expensive , yet compared to November 2007 when the average room rate was over £137 per night and the exchange rate was $2.02 = £ 1, the average room rate has dropped from $277 per night to  $200US.  That is nearly a 30% reduction in room rates for the American tourist in one year. 

The Euro has also gained in value from 1.40€ per £ 1 in December 2007 to just 1.10 € per £ 1 currently.  The reduction in price of UK hotels by 20 to 30% for Europeans and Americans still has not generated increased tourism.

UK Hotel Occupancy Declines from November 2007 to November 2008

London    - 6%  to 79.5% occupancy in November 2008

I think the hotel consumer needs to keep in mind while reading all the doom and gloom hotel news in late 2008 that 2007 was a peak in hotel room rates.  London hotels made record profits in 2007 and occupancy was at its highest in ten years since 1997.

The fact that airfare is a bargain during this final quarter of 2008, hotels in London and the UK cost 20 to 30% less than a year ago for millions of tourists, and occupancy is still declining at an accelererating rate indicates 2009 will be a year of remarkable value for travelers able to take advantage of the hotel economy downturn for some personal leisure benefits.

Story sources:

PKF Consulting April 11, 2008 – UK hotel sector well-positioned for challenging 2008.

Hotel Travel News November 14, 2008 -  London Hotels Set for Tough Year

Hotel Travel news December 15, 2008 – UK Hotels Feel the Pinch

I read Christopher Elliott’s blog post today onTripso.com, “Brace yourself for one of the deepest and longest hotel recessions in modern history”. 

Hard Times Call for Harder Travelers.

I look forward to the hotel bargains of 2009.   

U.S. Hotels Forecast: 3 Consecutive Years Declining Occupancy

HotelMarketing.com has an article with sobering hotel industry statistics for travelers.  Hotel occupancy declined by 0.3% in 2007 according to Smith Travel Research.   PKF Hospitality Research forecasts 2008 and 2009 will see even greater occupancy declines. 

Hotel stay demand is softening just as 275,000 more hotel rooms are scheduled to open by the end of 2009 compared to the end of 2007.  This is predicted to be the first time in 20 years hotels have experienced two consecutive years of occupancy decline.

Don’t make the rational conclusion that three years of declining hotel occupancy will lower average hotel rates.  The average hotel room rate for the U.S. is still predicted to rise 3.6% for all of 2008, followed by another 1.3% in 2009. 

The Good News?

Mark Woodworth, President PKF Hospitality Research, states hotel rates should not exceed the rate of inflation until 2012. 

I wonder if that considers the inflationary impact of printing $2,000,000,000,000 in money to borrow our way out of the current economic melt-down (there sure are a lot of zeros in trillions).

The Good News, Really!  Starwood Lowers Rates for Some Hotels

Looking over hotel rates here in the San Francisco region I see several Starwood hotel properties with rate drops for weekend travel.  I have predicted all year that as hotel rates increase for business travel days, Sunday through Thursday nights, the weekend rates for Friday and Saturday should decline to attract leisure travelers.  Resort locations tend to have the opposite peak period of higher rates for Friday and Saturday and lower rates Sunday through Thursday.

Starwood Hotels has 21 properties in the San Francisco Bay Area.  Recently, I have noticed rate drops at several hotels for weekend stays to some of the lowest rates in over two years.

W Silicon Valley has been stuck on $109 weekend rates for over two years and suddenly I see rates back down to $79.  This is an even lower rate than the limited time “Summer Sale” special offer Starwood Hotels ran last month. 

Sheraton San Jose is at $84 for many weekends over the next couple of months.  This hotel has just remodeled many of their rooms and rates had been $99 average for the past year.

The Palace Hotel in San Francisco which had been going for under $150 for many weekends in 2006 suddenly jumped up to $200+ for much of 2007 and 2008.  I see November rates back down as low as $139 for weekend nights.

There appear to be more bargains for the leisure travelers in combination with some of the best hotel loyalty program promotions of 2008.

Use the Categories link for “Fall 2008 Promotions” on the left side of the page to read about currently available promotions in all the major hotel loyalty programs.

Please leave a comment if you are seeing similar reductions in hotel rates for your area.

Hotel industry statistical data source: HotelMarketing.com U.S. Hotels to Bottom Out in 2009

Link to HotelMarketing.com

Link to Loyalty Traveler post: Hospitality Researchers Advise No Hotel Rate Cuts in 2008

I came across two data sources over the past couple of days that show interesting trends across the USA for airport flight reductions and average hotel rates for dozens of major cities around the USA.

This past month I have been seeing articles about the impact of airport flight cutbacks on the hotel industry.  An article I read estimated every 10% reduction in flights creates a 3.9% reduction in hotel demand for the area.  I imagined I could look at the data I saw on flight cutbacks and hotel occupancy and have some revelation, but it didn’t turn out that way.

Last Friday, USA Today produced a graphic showing the reduction in percentage of passenger seats for flights at 300 airports in the USA based on November 2008 schedules compared to November 2007.  My initial shock was to see my local airport in Monterey (MRY) is listed with 24.5% fewer seats.  And yet, I just searched for tickets from Monterey to Las Vegas and the fare is $100 all-in roundtrip, the lowest fare I’ve ever seen to Las Vegas from Monterey with our new airline service on Allegiant Airlines.

Smith Travel Research tracks US lodging industry revenue and publishes weekly reports.  The data for June indicates a significant slowdown in hotel occupancy along with a continued increase in average room rates.  The summer months of 2008 are seeing drops from summer 2007.  June 2008 hotel occupancy dropped 4.5% compared to June 2007 while the average room rate climbed 3.2% over the past year.

The good news for consumers is the average room rate increases are slowing in most markets as we progress through 2008.  My observation for the San Francisco Bay area is some of the lowest rates I have seen in a couple of years occasionally pop up over the past few months at several upper upscale hotels I track.  This is even as San Francisco has one of the strongest hotel markets in the USA due to high occupancy, high rate increases, and increased international tourism.  The Le Meridien Hotel was $139/night over the July 4^th when usual rates are $200+ for this hotel and I have seen the rates surpass $500 during some weeks. 

Impact of Several Years of High Hotel Room Rate Increases 

The budget traveler has seen average USA hotel rates rise 25%, and in some hotel markets like Hawaii even up 50% over the past 4 years.  Has your salary increased 50% in that time frame?  If not, then you are feeling the economic pressures on your travel lifestyle.

Assume Hilton, Starwood or Hyatt top elite status is achieved on hotel stays for a frequent guest with 30 to 40 nights per year in hotels.

2004 Full service hotels in USA $117 ADR (+12.5% tax) = $131.63

2005 +5.5% = $138.87

2006 +7.4% = $149.15

2007 +5.9% = $157.95

2008 +4.4% = $164.90

The average daily rate for a full-scale hotel in 2008 is $33.27 more than 2004 (a 25% increase in 4 years.) 

30 nights for top elite status will cost $1,000 more in 2008 than 2004 if you are in the average rate market.  New York, Miami, San Francisco, and Phoenix will cost you even more.

2004 the cost of 30 hotel nights at full service hotels averaged about $4,000 after taxes ($3,949).

2008 the cost has increased to $5,000 for 30 nights or your $4,000 budget that bought 30 nights 4 years ago now only buys 24 hotel nights.  Think one less week vacation and not enough nights for top elite frequent guest status.

Top 10 Hot Hotel Markets in USA

Source: TWR Hotel Outlook Summer 2008, Cornell University, School of Hotel Administration

Average Daily Rate (ADR) annual increase over 7% from First Quarter 2007 to First Quarter 2008

1.      Charlotte, NC  9.6%

2.      Houston 9.1%

3.      San Francisco, 8.8%

4.      New York City 8.7%

5.      Fort Worth, TX 8.3%

6.      Columbia, SC 7.9%

7.      Richmond, VA 7.6%

8.      Cincinnati, OH 7.1%

9.      Portland, OR 7.1%

10. Philadelphia 7.0%

11 Cool Full-Service Hotel Markets

ADR annual increase less than 2% from First Quarter 2007 to First Quarter 2008

1.      Trenton, NJ -3.1%

2.      Fort Lauderdale, FL -1.5%

3.      Tucson, AZ -1.3%

4.      New Orleans, LA -0.8%

5.      Cleveland, OH 0.4%

6.      San Diego, CA 0.4%

7.      Miami, FL 1.0%  (already overpriced at #1 upscale ADR in USA in 2007)

8.      Columbus, OH 1.1%

9.      Long Island, NY 1.2%

10. Baltimore, MD 1.3%

11. Atlanta, GA 1.6%

10 Expensive Cities for Full Service Hotels

(Room Rate Percentage increase from First Quarter 2007 to First Quarter 2008)

1.      West Palm Beach, FL $265.18  (4.9%)

2.      New York City $254.71 (8.7%)

3.      Miami, FL $249.53  (1.0%)

4.      Phoenix, AZ $203.10  (4.8%)

5.      Fort Lauderdale, FL $195.38  (-1.5%)

6.      Honolulu, HI $186.86  (6.0%)

7.      Washington, DC $175.33  (2.2%)

8.      San Francisco, CA $174.65  (8.8%)

9.      San Diego, CA $171.67  (0.4%)

10. Los Angeles, CA $161.91 (5.1%)

10 Low-Cost Cities for Full Service Hotels

(Room Rate Percentage increase from First Quarter 2007 to First Quarter 2008)

1.      Dayton, OH $83.87 (2.1%)

2.      Albuquerque, NM  $96.38  (5.6%)

3.      St. Louis, MO  $101.45  (2.2%)

4.      Columbia, SC $101.63  (7.9%)

5.      Omaha, NE  $102.94 (5.6%)

6.      Cleveland, OH $104.43  (0.4%)

7.      Richmond, VA $107.02  (7.6%)

8.      Cincinnati, OH $107.41 (7.1%)

9.      Kansas City, MO $108.34  (4.9%)

10. Albany, NY $110.10  (2.6%)