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News for the Hospitality Executive |
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| By Robert
A. Rauch, CHA October 6, 2011 We continue to experience the “hangover”
from the great
recession of 2008. It looked like things were turning around in May but
summer
may have been soft enough to keep a watchful eye out for a possible yet
unlikely “double-dip” recession. The Global Business Travel Association Foundation study claims business travel will be up 9.2 percent this year. They claim that by 2013, peak 2008 levels will have returned. A TravelClick study, also looking forward, is indicating that global distribution system bookings are up and in fact, were up 15 percent year over year on the day Standard & Poor’s downgraded the U.S. credit rating. The advantage to their information is that it is based on actual booked rooms over the next 12 months. As for the economy in San Diego, the Burnham-Moores Center for Real Estate at the University of San Diego reported that leading economic indicators were up sharply in San Diego through May. This pattern softened quite a bit in June
where the Leading
Economic Indicators experienced the first drop in two years and July
was
virtually flat at +.2 percent. Notwithstanding this, occupancy levels
should
hit 69 percent by year end, up from 66.7 percent last year and $127, up
from
$122 last year. The booking pace, according to TravelClick is up in
both the
group and individual segments. REVENUE MANAGEMENT Today, the frequency of these pricing
decisions is
dramatically different. Some hotel companies have revenue
management
meetings daily, others weekly. Advances in technology can support
immediate measurement of competitive market forces. It is now
possible to
update prices for all future arrival dates to match market demands each
day. Mobile channel booking has increased four-fold between 2008 and 2010 according to Forrester Research and Google is projecting that mobile will overtake PCs as the most common web-access device by 2013! This, coupled with social media represents a good portion of the major shift in revenue management from art to science. RM allows one to project revenues and provides for a set of actions that form a foundation for a successful business plan. This then becomes the key ingredient in the budget process for 2012. Without an accurate business plan and budget, a hotel is not likely to be successful. OTHER KEY TRENDS There are some programs that were part of
the Economic Stimulus Plan that
expire this year, so talk to your lender/advisor soon if you are going
to be
looking for debt in 2011. We expect distressed asset transactions to
continue as over
leveraged properties reach loan maturity dates and owners are unable to
come up
with the expected equity requirements. The market appears to be getting
more
competitive for hotel buyers in the U.S. Many public companies target
an
internal rate of return north of 10 percent, but many of the REIT
acquisitions
have been well below that, particularly a few in San Diego.
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| Contact:
Robert A. Rauch, CHA |
| Also See: | The
“W” Hotel Is the Talk du Jour / Bob Rauch / June 2009 |
| Sunstone Hotel Investors Attribute Size of Mortgage, Recession and Competition As Reasons to Walk Away from Ownership of W San Diego / June 2009 |
