12 June 2008

Hotel room rates remain steady

The faltering US economy and gas prices are affecting hotel demand, but what has been the impact on room rates?

So far, not much.

For every 10% increase in gas prices, there is a correlating 0.5% decline in hotel demand, said Bjorn Hanson, a hospitality and leisure researcher for PricewaterhouseCoopers.

But the decrease in demand is not expected to slow room rate growth any time soon, said Mark V. Lomanno, president of Smith Travel Research, Hendersonville, Tenn. He pointed out that despite the reduced availability of credit, and given the economic environment, the fact that hotel room rates have not declined is encouraging for the hotel industry.

Lomanno said he doesnÃ¢â¬â¢t expect negative growth in RevPAR--revenue per available room--the industry metric that examines room revenue in a hotel property divided by the number of rooms available.

Still another piece of good news for the hotel industry is that while supply is growing, it is growing at the Ã¢â¬Åâœlow end of historical norms,Ã¢â¬~ Mr Lomanno said.

Weekday occupancy is providing more revenue for hotelsÃ¢â¬'a new trend, he said. At the end of April, weekday business accounted for more than $24 billion in hotel revenue, up from more than $23 billion for last year.

by David Wilkening