|By Donna Goodison, Boston
HeraldMcClatchy-Tribune Regional News
Jun. 23, 2008 --Sixteen new hotels with 3,889 guest rooms have opened in Boston and Cambridge in the last five years, and there are four more hotels to come this year and next.
After a record hotel industry performance in 2007 -- when average daily room rates and revenue per available room reached new highs, finally rebounding from a severe post-9/11 downturn -- will market demand keep up with the new supply?
Industry analysts believe so. With 20,734 hotel rooms already in service, the additional 648 rooms coming on line will represent only an incremental 3 percent increase.
"We do not believe that we are headed for an oversupply situation, because the market is already operating above 75 percent occupancy," said Matt Arrants, managing partner at Pinnacle Advisory Group, a Boston hospitality consulting firm that compiles and analyzes hotel industry statistics. "If market occupancy drops in the latter half of the year or in 2009, new supply will certainly play a role, but it will be more due to a decline in demand related to the economy."
The average hotel room occupancy rate was 76.6 percent for Boston and Cambridge in 2007, a 5.5 percent increase from the prior year but below the record 79 percent set in 2000 due to the number of new hotel rooms. While the rate is up 2 percent from last year through April, Arrants doesn't expect that to hold through year's end. The pace of group bookings from citywide conventions was up for the first half of the year, but is trailing for the remaining six months compared to 2007.
"My inclination is that it will probably be flat," Arrants said.
In an attempt to boost business at a time when Americans are being squeezed financially, the Greater Boston Convention & Visitors Bureau is launching a new marketing campaign today with American Express. Targeted to potential visitors between 50 to 250 miles away, the campaign will offer three-night stays for the price of two at 10 participating hotels, as well as special offers from restaurants, museums and other attractions.
"Rising gas prices, the uncertain economy and the cutbacks in the airline industry definitely will have an impact on the next six months for our visitor industry," said Pat Moscaritolo, the agency's chief executive. "We need some special programs out there to provide some incentives for people to get in their car and come."
One segment of the hotel market that continues to outperform and be very strong is business from international tourists, especially those from the United Kingdom, Germany, Italy and France.
Those numbers literally are off the charts, Moscaritolo said. Our dollar is like equivalent to the peso. In relative terms, the dollar is so weak against the euro and the pound, that they can come here and stay five nights and its equivalent to them to two nights.
Which is why the four hotels throwing open their doors this year and in 2009, all of them high-end, are expected to do well. The ultra-luxury Mandarin Oriental Boston will open this fall along with the Battery Wharf hotel, and the Ames Hotel and W Hotel will debut in 2009. In addition to capturing the reservations of wealthy international tourists, they're also expected to lure business travelers, which account for four out of 10 visitors to Boston and Cambridge.
"If the market stays as strong as it's been recently, it could support this additional luxury supply," Arrants said. "It's not uncommon for people to move down the chain scale during recessions, but so far we haven't seen a lot of that."
The 148-room Mandarin Oriental Boston, in particular, is expected to do well when it debuts in October. The Mandarin brand has a great reputation for a luxury product and as managers, and its guests room are "huge," said Arrants.
"The other thing it's got going for it is Robin Brown," he said, referring to the former 14-year Four Seasons Boston general manager who's developing the property with CWB Boylston. "He's got such strong relationships with corporate leaders in Boston that they're likely to at least try the hotel and have their business colleagues and friends and family stay there."
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