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Kansas City First Quarter 2007 Hotel Occupancy
 Falls from 54.2% a Year Ago to 52.8%
By Rick Alm, The Kansas City Star, Mo.McClatchy-Tribune Regional News

May 30, 2007 - There's a worrisome blip on the Kansas City lodging industry's radar screen.

For the first time since 2003, the area's quarterly hotel occupancy rates dipped, falling from 54.2 percent a year ago to 52.8 percent, according to Jeffrey K. Marvel, of Marvel & Associates.

Marvel attributed the first-quarter slippage to a 2 percent drop in demand and a 0.4 increase in the area's supply of hotel rooms.

"We are not overly concerned about this soft first-quarter performance," said Marvel, a Kansas City-based industry consultant. "The first-quarter Kansas City hotel market is typically the weakest and most vulnerable" because of "the seasonality of tourism travel and the weakness of the convention market during that period."

The good news, Marvel said, was 5 percent growth in the average daily rate charged by hotels and a 2.6 percent increase in the key index of revenue per available room.

"I'll feel better when we have the second quarter under our belt," he said. "One quarter does not a trend make."

Steve Olson, president and chief executive of Leawood-based Leisure Hotels & Resorts, agrees.

"I don't know what's different this year compared with last year," Olson said of business at his 24-hotel group, including four area properties. "It's not necessarily down, but it's flat.

"There's no question that demand has flattened out if not slightly declined. ... The supply side is definitely increasing."

Marvel said a strong pace of future convention bookings and completion of an estimated $4 billion worth of downtown Kansas City redevelopment and new attractions were expected to boost occupancy later this year and into 2008. But he said thegrowth would not be automatic.

According to Marvel's development-pipeline data, 12 properties totaling 1,203 rooms are under construction in the metropolitan area, while an additional 38 properties totaling 3,290 rooms are in various planning stages. Not all of those rooms will be built, but those that are will start coming on line sometime after 2008.

Meanwhile, rooms now under construction will add 4 percent to the area's current supply of 29,000 rooms.

The growth will keep pressure on groups such as the Kansas City Convention and Visitors Association to keep those rooms filled by marketing and selling Kansas City as a leisure and business destination.

Olson said the construction boom might not slow for a while.

"It's a great time to be building," he said, with real estate still an attractive place to park money and building costs down from post-Katrina heights.

Kansas City's first-quarter performance was in line with national trends, but that too could prove worrisome.

The industry news site hotel-online.com recently cited Smith Travel Research findings that indicate national supply growth this year is up by 0.2 percent while demand is trending downward at 0.6 percent.

Those national trend lines recently crossed, and the last time that happened was 2001, presaging a tailspin in national and Kansas City demand rates that took almost three years to correct.

Is a travel recession replay in the cards?

Not yet, according to Marvel.

"I share some of those concerns," he said of the troubling trend lines. "I think we're going to see normal occupancy averages dropping generally."

But Marvel noted that improved hotel efficiencies in recent years, combined with still-low interest rates, relieved financial pressure on operators to maintain occupancy at traditionally healthy 60 percent to 65 percent levels.

The financial break-even point for many operators is settling in somewhere below that old benchmark, he said.

To reach Rick Alm, call 816-234-4785 or send e-mail to ralm@kcstar.com.

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To see more of The Kansas City Star, or to subscribe to the newspaper, go to http://www.kansascity.com.

Copyright (c) 2007, The Kansas City Star, Mo.

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