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What is the Outlook for the Lodging Industry?

AAA estimated that there would be 2.4% less people travelling in this Labor Day weekend than last year. The Wall Street is worrying about the future of the lodging and leisure industry. So, how is the industry doing? What will the future look like?

Starting from 2010, I have heard from my industry network that hotels are picking up business. If we look at the 2011 Lodging Industry Profile by the American Hotel & Lodging Association, we can see that the ADR (average daily rate) is up slightly from $97.85 in 2009 to $98.07 in 2010 and that the occupancy rate is up from 54.7% in 2009 to 57.6% in 2010. Even though 2010 is not as good as 2008 (ADR: $106.84 with an occupancy rate of 64.37%) and everyone is still very concerned about the job market and their spending, we are able to observe some positive signs of recovery in the lodging and leisure industry. The issue is probably some market segments perform (or recover) better than others. In general, it seems that boutique hotels are doing fine and every hotel chain is trying to get into the boutique hotel market. Midscale and economy/budget segments are also doing well --- sales of Best Western are up 12% from last year as suggested in this embedded CNBC video; Wyndham is also doing well according to another CNBC report.

To become a market leader, one must continuously invest in the company even during recessions. Best Western focuses on Sales and Marketing, with the efforts of rebranding the chain and hiring more sales & marketing staff. Sheraton is having a $6 billion makeover plan. What about you? In which area(s) will you invest during recessions?

Comments

  1. Hannah Feuerstein-SimonSeptember 5, 2011 at 8:52 PM

    While the country is certainly in a recession and people aren't spending as much of their disposable income on going out to eat and traveling, people are still going on vacations to some extent. As you mentioned, the occupancy rate for hotels was up almost 3% from 2009 to 2010, so that shows some progress.
    My family is going to New York City this weekend and looking for a hotel to stay in. A hotel we normally stay in that costs around 300 or 400 dollars was over 500 dollars for this coming weekend. These price increases show that the hotel rooms are in high demand and the hotel is able to make such a price adjustment for that specific weekend.
    In terms of investing in certain companies, the types of things I look for are improvement in the quality of the room and the customer service that the hotel has. I always look for technological advances in hotels when I go. It makes me happy to see progress and alterations of the room I'm spending money on. Something like a heated floor and towel racks would be things I would look forward to.
    Not only are the amenities of the hotel room important to me to make an investment decision, relying of competent staff is extremely important. There is nothing worse than checking into a hotel with a front desk agent that doesn't know anything about the hotel and/or isn't friendly. Additionally, having quick service when I make a phone call is important. I don't want to wait an hour to get an extra towel delivered to my room.
    With these areas in mind I would be able to make an educated decision in my investments during the recession.

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  2. Thank you, Hannah. All of my friends are telling me how difficult it is now of finding a cheap room in Manhattan. Plus, NYC becomes the No. 1 destination of the U.S. in the last two years (I believe). I also like your ideas of investing in technology and service. Very good comments.

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