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Occupancy in the Detroit Area Turning the Corner
During First Six Months of 2004; Difficult Period
for Michigan Northern Resorts

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November 2004 - Hospitality Advisors

Michigan Overview

It appears that at midyear 2004 occupancy is starting to increase over 2003 levels, but at the sacrifice of average daily rate. Twelve of our sixteen regions are showing either increased or equal occupancies to those in 2003. Conversely, eleven of the regions are showing decreasing average daily rates. Overall, in the state of Michigan occupancies for the first six months were equal to last year at 55%, however rates dropped by an average of $3.00.

Occupancy Winners? – Things seem to be turning around in the Detroit Metro area, with the majority of our regions showing increases. Romulus-Airport is the big winner, up 6 occupancy points over YE 2003. Lansing and the Troy area are also looking strong with 4 and 3 occ. point increases respectively.

On the other side of the coin, the first six months of 2004 proved difficult for the Northern Resorts, which were down 8 occupancy points. The Flint and Tri-Cities also saw a decrease of 4 points. 

Average Daily Rate Winners? - It seems that the goal here was to see who could hold rates the firmest, without loosing ground. Lansing was the most successful, showing a $1.00 increase in ADR from YE 2003. 

Auburn Hills, the East Area, Grand Rapids and SW Michigan were able to maintain their ground, while every other region saw decreases. Southfield appears the hardest hit, with ADR dropping $6.00 from YE 2003. The Romulus-Airport and Troy regions also saw decreases of $4.00 and $5.00 respectively, leading one to think that increased occupancy in these regions is at the expense of ADR. 

Charles A. Skelton Comments / Hospitality Advisors - Consulting Group 

Back in the old days (five to six years ago) it seemed like those in the hotel industry were more in control of their own destiny. If you had a good flag and a clean property that provided reasonable amenities, you could expect that guests would visit and pay a reasonable price for their accommodations. During the downturn of the past four years, however, as the lodging demand has sagged, potential guests have turned to the Internet to find lower and lower rates. 

The Internet has become sort of a double-edged sword in our industry. On one hand it provides an opportunity to become exposed to a very broad customer base. On the other hand it has opened the door for third parties to access our lowest rates. In times of low demand this creates great pressure on rates, and we can often feel powerless to maintain them without extra effort. Ahh, there is the key…manage rates. 

Our natural tendency when occupancy drops is to sacrifice rate, when in fact we should manage rates more closely. Some managers do this well, but overall I think that as an industry we do not manage rate effectively. It is really pretty simple. Get maximum rates during periods of high demand and block out those programs that discount. Additionally, during periods of medium demand, monitor rate closely and stick to your guns at the front desk. In low demand times open the floodgates and take what you can get. By shutting the low rate spigot off during high demand and by training front desk personnel the importance of up-selling at all times, you will maintain a higher average rate. Like anything else if you work at it, you will get results.

As demand begins to increase, as it is currently, time spent managing rate and understanding and recognizing stronger demand periods will pay off in spades. Somehow the lodging industry is always willing to ask less, but has a hard time asking more. Create value, maintain the asset and provide friendly and caring service and guests will return to your property and will pay well for it. Value is not price sensitive.



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Contact:

Mr. Charles A. Skelton 
Hospitality Advisors - Consulting Group 
411 Huron View Boulevard - Suite 104 
Ann Arbor, Michigan 48103 
www.hotelexperts.com
(734) 741-8686 x. 203

Mr. Laurence G. Allen, MAI 
Hospitality Advisors - Valuation Group
2100 E. Maple Drive - Suite 350
Birmingham, Michigan 48009
www.hotelexperts.com

Mrs. Holly A. Skelton 
Hospitality Advisors – Sales & Marketing 
411 Huron View Boulevard - Suite 104 
Ann Arbor, Michigan 48103 
hskelton@hotelexperts.com
(734) 741-8686 x. 200 

Mr. Steve Yencich
Michigan Hotel Motel & Resort Assoc.
225 W. Washtenaw - Suite 202
Lansing, Michigan 48933
www.michiganhotels.org

Also See: Parisian Landmark La Trémoille Named Preferred Hotels® & Resorts Hotel of the Year for 2004 / August 2004
Willows Lodge, Woodinville, Washington Honored as Preferred’s 'Hotel of The Year' / Aug 2002
John A. Ueberroth Signs an Agreement to Become the Largest Shareholder, Chairman of the Board and CEO of The Independent Hotel Corporation, IndeCorp. / March 2004


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