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Atlanta's 92,000 Hotel Rooms Hoping for Strong 2005;
Limited-service Hotel Performance Expected to
 be Stronger than Full-service Hotels
By Leon Stafford, The Atlanta Journal-Constitution
Knight Ridder/Tribune Business News

Oct. 6, 2004 - More travelers are expected next year at hotels across metro Atlanta. But it's the bargain over-nighters along interstates -- not the posh towers lining Peachtree Street -- that should fare best as leisure travelers continue to outnumber business travelers.

Economy hotels, especially those outside I-285, will draw most of the area's leisure travelers, said Mark Woodworth of PKF, a hospitality consulting firm that recently released its annual report on the Atlanta hotel industry.

He predicts bookings at limited-service hotels will increase 12 percent next year, while full-service hotels should get a bump of just over 3 percent.

Leisure travelers -- people in town for vacations or to visit family, shop or go to sporting events -- tend to be more price-conscious and prefer the simplicity of smaller properties, he said. Last year, leisure travelers accounted for nearly seven in 10 visitors to metro Atlanta, according to the Atlanta Convention and Visitors Bureau.

"They are coming back stronger for limited-occupancy hotels than the full-service hotels," Woodworth said.

That helped economy chain Suburban Lodges of America grow its business 7.3 percent nationwide for the first half of 2004, said Kevin Lewis, chief executive officer and president of the Atlanta-based company.

"The economy is improving, and there is a better sentiment out there," Lewis said.

The uptick should help hoteliers of all stripes raise rates after three years of offering cut-rate discounts to draw customers, Woodworth said.

But, he cautioned, "The higher-end corporate customer and the meeting industry is not coming back as much as the leisure traveler."

Big hotels are eager for their bread-and-butter, the business traveler, to check back in. Ronen Nissenbaum, general manager of a new InterContinental Hotel coming to Buckhead in November, said the scarcity of business and convention bookings is "a negative."

But he contends his 422-room hotel will outcompete rivals for business travelers because it can accommodate meetings of up to 900 people. He said Buckhead has not offered that much space.

"We are certainly going to be able to pull business into Buckhead," said Nissenbaum, whose hotel bears the flagship brand of InterContinental Hotels Group. IHG, a British company with North American headquarters in Atlanta, also owns the Holiday Inn, Crowne Plaza and Staybridge chains.

PKF's rosier outlook for 2005 comes after an industrywide slump brought on by the reluctance to travel and the continued economic downturn after Sept. 11, 2001. In Atlanta, as elsewhere, attendance plunged at meetings and trade shows, leaving hotels -- especially downtown properties that depend heavily on convention traffic -- with huge surpluses and front-desk workers twiddling their thumbs.

In early 2004, the hotel business began turning around as the economy strengthened and travelers felt safer flying, Woodworth said.

He warned escalating energy and insurance costs will temper some of next year's additional revenue from bookings. Plus, labor costs, which were lowered by hotels cutting staff during the past three years, are expected to go up.

Also worrisome, Woodworth said, is Atlanta's oversupply of rooms. The city began adding hotel rooms during the late 1980s, picked up the pace after winning the 1996 Olympic bid and continued building unabated during the tech boom of the late 1990s. Today metro Atlanta has close to 92,000 hotel rooms, one of the highest counts in the country. On average, about 63 percent of metro Atlanta's hotel rooms have been booked on any given day this year.

Next week's expected opening of another InterContinental hotel -- an upscale 140-room boutique offering in Midtown called Hotel Indigo -- will exacerbate the glut, Woodworth said.

"We're still recovering from the extraordinary supply growth since the 1980s," he said.

-----To see more of The Atlanta Journal-Constitution, or to subscribe to the newspaper, go to http://www.ajc.com.

(c) 2004, The Atlanta Journal-Constitution. Distributed by Knight Ridder/Tribune Business News. For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com. IHG,

 
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