Hotel recovery gets real: will rest of travel follow?
Good news for the long-ailing hotel industry: industry leader Marriott International plans to raise room rates in the coming months after a pick-up in traveler demand — and predicts rates to continue to rise.
"The resurgence of corporate booking will likely yield higher room rates by the end of 2010," Arne Sorenson, president and chief operating officer, said during a conference call with analysts. "Our optimism is not so much driven by this quarter’s numbers, as it is by the prospects of the next few years."
Given that revenue per available room declined for many companies by 15 percent to 25 percent last year, "this is real a bounce off the bottom," said John Arabia, an analyst with Green Street Advisors.
"Marriott is a bellwether for industry operator fundamentals because it has such wide geographic and brand distribution. . . . Their results show that the recovery is real."
Nevertheless, the industry-wide plummet in profits since 2008 — roughly 50 percent on average for full-service hotels — makes a full-throated recovery a far-off prospect.
"If you compare absolute numbers of where we are now to 2007, we have a big hole that we have to climb out of," said Bobby Bower, senior vice president of operations of Smith Travel Research. He noted that further economic tribulation could make that hole even deeper.
"We’re not oblivious about the recent concerns" about the broader economy,” Sorenson said, "but we have not seen those concerns impact our business and we continue to be optimistic."
While Marriott’s corporate and premium room rates saw low double-digit growth in the previous quarter, they remain about 20 percent off from 2007 peak levels. What’s more, roughly 15 percent of the company’s rooms are listed at a discount.
C. Patrick Scholes, an analyst with FBR Capital Markets, said the company’s results suggest a recovery may be underway.
"There is a lower supply of vacant hotel rooms than there was two years ago, and now hotels can demand higher prices from business travelers," said Scholes.
By David Wilkening
David
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