Today I want to comment on a number of articles I have seen over the past week.

#1  - Does a guest on a stay using points pay resort fees?

Last week a FlyerTalker raised this question on the Starwood Hotels forum.

The general reply was Yes, the guest does pay the “resort fee” when staying at a resort hotel on points.  I found this to be the case with a $20 “resort fee” when I stayed at the Westin Mission Hills Rancho Mirage (Palm Springs area) in April on a Cash & Points rate.  Here is my trip post about the Westin Mission Hills hotel in April 2008.  Fortunately, most hotels do not have add-on “resort fees”.

 

#2 – Food & Beverage Pricing Tricks

This article gives hotels tips on how to trick the consumer into thinking the price has better value.

As a former mathematics content editor for state-level student assessments I find “Confusion Pricing” an interesting trick.  If not many people can work out the nightly cost of  a hotel room that is priced at $545 per week, then the hotel industry has little to fear from my blog that focuses on showing loyalty program value through simple math.

 

#3 – Hilton Moscow Leningradskaya has opened and is Russia’s first Hilton.  The 28-story historic Stalinist neoclassical skyscraper underwent a two year $100 million dollar renovation.  A sample rate check for October 16, 2008 showed the lowest available rate of $548.52 + $98.73 tax for a grand total of $647.25 for a twin deluxe room.  No blackouts for awards with a Category 5 free night at 35,000 points makes for a much better value using points.  A six-night GLON2 award for 150,000 points would have almost a $4,000 value.  Now that is Points Power!

 Hilton has big development plans for Russia with as many as 70 properties scheduled to open over the next decade.

 

#4 – Beijing Olympics Hotel Rates were triple the regular average rates according to STR Global.  The average daily rate for hotel rooms across Beijing was $446 during the Olympics.  Some of the Olympic sporting venues looked rather sparse in spectators on the TV, however, with hotel occupancy hovering around 80 to 90% city-wide there was probably quite a bit of spectator action in hotel lobbies.  While Beijing was hopping with activity, the hotels in Hong Kong, host of Olympic equestrian, and Qingdao, the site of sailing competition experienced a decline in average hotel occupancy for the Olympics.

By the Tuesday after the games closed, hotel occupancy had dropped to less than 35% and room rates also dropped dramatically by 60%.

 

#5 – Resort Hotels Across the USA Lower Average Rates in 2008 according to Smith Research and this article from the Wall Street Journal.  Resort occupancy declines in the 6% to 10% range being felt across the country and some hotels see no alternative but to lower rates.  (But, remember those resort fees!)

#6 – Switching Hotel Rooms: Legitimate Request or System Scamming?

This New York Times article looks into people who check into a hotel and then seek a different room.  And the article states women are more likely to request a room change.

My record is for the Hotel Pulitzer Amsterdam, a Starwood property.  I think I made two room change requests before the hotel gave me a room that I felt was worth my money paid.  I have felt compelled to request room changes for the Pulitzer on at least three stays.  Amsterdam is just too pretty to be in an interior facing room.

The number one benefit of elite status in a hotel loyalty program is the high probability of getting a room with a preferred view for the hotel site.

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%)

 

 

 

 

 

Concierge Traveler – Hotel and Travel News  

I have noticed trends in the hotel industry stories over the past couple of weeks since not posting much while traveling around in San Francisco and Denver.  Here is a selection of interesting travel industry articles I have seen lately.

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I have been writing much of this year on the “perfect storm” of currency exchange economics, perception of declining wealth among Americans and its impact on international travel, and the hotel revenue management teams insisting on maintaining historically record high room rates. 

My conclusion is the trifecta will decrease the room rate inflation for hotels in the U.S. but I anticipate wildly swinging hotel rates for the rest of 2008.  Expect exorbitantly high room rates in major city business center hotels during busy work weeks and peak travel conferences when the hotels will strive for enhanced revenue. Anticipate more frequent hotel room bargain rates during extreme lulls in business travel to induce leisure travel stays. 

The leisure traveler will see great hotel rate opportunities and an increased probability of getting a high value-added incentive like a complimentary room upgrade, free parking, restaurant meals and/or bar drinks, and quite possibly a high added-value rebate through hotel loyalty program bonus points towards a future free night redemption.  Unlike airline frequent flyer miles, hotel programs make room redemption using frequent guest points a fairly simple process.

Rising fuel costs balanced by staff reductions seems to be the business practice for keeping profits rising in the face of declining occupancy and pressure on room rate rises.  Europe is seeing a widespread decline in the American tourist market on the order of 10-15% fewer visitors for places like Ireland this season than last year so far.  The British pound has lost nearly as much value against the Euro in the past year as the dollar – around 15%.  A survey of UK  travelers shows 13% cutting back on travel plans due to weaker value of the British pound in past year.  British tourists are finding less value in travel to Ireland.  British tourists are increasingly favoring Turkey to escape the Euro zone for a beach getaway as even the rising cost of a holiday in Spain pushes bargains aside.

The indicators are that major cities are faring better than outlying regions for tourism such as Budapest.  London, Amsterdam, Paris, and Berlin are still strong attractions for the tourist and business conference market.  Ireland and Scotland are seeing summer tourist fortunes decline.  Still there are analysts saying “there are no decline in business hotels for 2008” and the scenario is not so bad as hotels continue to profit, just to a lesser amount than in previous years and the cut rate bargain hotel rooms may not be coming to your town anytime soon.

Now I am waiting to see the loyalty program response to initiate more interest in hotel travel for the second half of the summer season.  The incentives are nowhere near the high value hotel frequent guest promotions of last fall, winter, and spring.

Expedia has dropped 48% in stock value since October 2007 and the recent announcement of the purchase of Venere.com did not seem favorable to the market.  For the consumer the deal just might be upbeat.  Venere.com has accommodation relationships with nearly 30,000 European and US properties and the acquisition will add more than 10,000 new hotels in Europe, Africa, and the Middle East to Expedia’s reservation system.

More interesting to me is the acquisition of VirtualTourist.com by TripAdvisor.com.  Expedia is moving along as the major player in the hotel travel review and travel media market and now adds a vibrant social media component to the Expedia portfolio.

Hotel stocks and travel stocks in general are taking a hit on Wall Street with many at 52-week lows.  Marriott reports profits are declining in the past few months by a substantial margin of 24%.  Analysts predict that reduced airline capacity may exacerbate the problem of lower hotel occupancy for geographically isolated U.S. cities like Denver, Colorado to an extent larger than the post-September 11 travel slump.

 

Don’t think twice, it’s alright

            – TripAdvisor’s top ten places to show your skin.

Don’t think twice, it’s not alright to slip out of that tan line clothing in Dubai. 

-         And a tourist asks can you still kiss in public on a Dubai beach? 

 

Hotel Website Redesign and Brand Recognition

HotelChatter.com reaction to the Starwood Hotels’  Luxury Collection website redesign and recent articles on InterContinental Hotels media library, Hilton’s Conrad and Waldorf-Astoria brands are all pieces pushing brand recognition with website enhancements to distinguish these upscale and luxury brands within the corporate hotel family. The St. Regis Fort Lauderdale is being stripped of its brand name affiliation with Starwood Hotels.

Boston and Las Vegas  Coast-to-Cost Blues

Boston hotels predict harder times ahead as fuel costs and operating expense increases cut into diminishing profits.  The hotel rates in Las Vegas are reported to be at their lowest room rates since 2003 in this LA Times blog.

 

 

 

 

Cornell Bears go Bullish: Advising No Hotel Rate Cuts in 2008

Yesterday’s post made reference to a report from Cornell University’s Center for Hospitality Research regarding hotels not cutting rates to lure travelers to hotels because the practice does not increase hotel profits. I was recalling an article I had read a couple years back regarding post 9-11 hotel rate studies in the US.

I received an email from the Cornell Center for Hospitality Research today that features a new research report from the same team of Linda Canina Ph.D. and Cathy A. Enz Ph.D.

The US hotels study I referenced is “Revenue Management in U.S. Hotels: 2001 – 2005″ and it can be linked to here: http://www.hotelschool.cornell.edu/research/chr/pubs/reports/abstract-14021.html

Well, today the news from the Center for Hospitality Research reconfirms this marketing practice of not discounting rooms in a just published study of 135 upscale hotels in Asia.

http://www.hotelschool.cornell.edu/research/chr/pubs/reports/2008.html

The gist of the paper, as far as hotel frequent guests are concerned, is hotels are advised not to reduce their room rates to attract more guests and raise revenue. Research shows that a slight room rate cut below the rates of comparable hotel competitors does not increase revenue. Now, we will need to see how the US hotels integrate this idea in their pricing structures.

For this area of northern California, since 2005, hotels have tended to stay away from the low rates more commonly seen between 2002 and 2004. The days of $69 rooms every weekend for the W Hotel-Newark disappeared soon after the 2005 report came out. The rates at the W Hotel-Newark are typically $109 as a low these days, with the possibility of a $99 AAA rate. Even though the really low rates were not that common in the airport and suburb hotels regionally, 2007 had some of the best deals for San Francisco city hotels for brief periods of time when business travel was low. Otherwise rates were sky high.

2008 is a wait and see for hotel rates. As far as the Cornell Red Bears strategy goes–Hotels need to remain bullish.

Unlike the Fed, don’t expect hotel rate cuts to come deep and fast in 2008.