January 29, 2009 - The Kansas City area's lodging industry was a ray of sunshine peeking through the dark economic clouds of 2008.

Area hotels did better than regional competitors and the national industry -- and booked more future business than any time in the past five years.

"Meeting planners are responding to our downtown development," said Rick Hughes, president of the Kansas City Convention & Visitors Association.

For the year, the association booked 41 future conventions at Bartle Hall, up sharply from 27 in 2007. Those conventions, scheduled as far out as 2016, are expected to fill more than 438,000 hotel-room nights, up 31 percent over 333,000 room nights booked in 2007.

In a year-end report, Hughes also said the association last year played host to delegations from 127 groups considering Kansas City for future events -- more than two per week and up 20 percent over 2007.

Meeting planners are taking "a second look" at Kansas City, Hughes said.

Keeping hotels filled with out-of-towners is a priority if the city is to meet long-term debt obligations and pay for the glitzy new downtown without raising local taxes.

Filling existing hotels is also critical in making the association's case that downtown must begin planning now for a new 1,000-room hotel to compete for larger conventions -- and avoid losing events such as the annual Wal-Mart Stores Inc. national managers meeting. That huge event canceled after 10 years, having outgrown the city's supply of hotel rooms convenient to Bartle.

One booking coup by the association last year will help to fill the Wal-Mart void. Educational Testing Service, a national nonprofit organization that administers and grades college placement and other academic exams, first met last year in Kansas City and booked through 2011. After just one year, the group extended its deal through 2014.

"We had such a good experience we decided to extend it," said Sue Brenner, an organization liaison who praised the handy dining options in the Power & Light District, area museums and other attractions, plus the fact that Bartle Hall could handle the group's expected growth.

By 2012, the event is expected to consume more than 34,000 hotel-room nights and become the city's largest annual event.

"You can't expect to book something like that every year, but it's going in the right direction," said association Chairman Bill Lucas, who is also president of Crown Center Redevelopment, owner of the Hyatt Regency and Westin Crown Center hotels.

There are no signals yet whether a majority of the City Council would support tax breaks or other public incentives for a new hotel, but the mayor has so far opposed it. And with long-term credit markets in the tank, the hotel conversation may be over for a few years.

Lucas said he wasn't giving up.

"A new hotel has to be part of the city's long-term planning," he said. "In the long run, if we don't increase our hotel room inventory, we're going backwards."

The industry's case at City Hall would be easier to make in a stronger lodging economy, but the national outlook is gloomy.

In a revised forecast this week, Smith Travel Research said it expected occupancy nationwide to drop 3.9 percent, worse than the 3.5 percent drop it forecast last fall.

A turning point for Kansas City area could come in March.

For five days starting March 2, more than 300 professional meeting planners affiliated with Experient Inc. will gather in Kansas City for their national conference. Last year Experient associates booked more than 3,000 conventions and other events nationwide, for a staggering 4.7 million hotel-room nights.

Also, the city announced Wednesday that 425 meeting planners with the Religious Conference Management Association would meet in Kansas City in 2012.

Besides highlighting the revived downtown, the city can remind the small army of visiting planners of the Kansas City area's comparatively low prices: The average hotel room price in the area in 2008, $86.42, was the lowest among seven rival cities and $20 cheaper than the national average. St. Louis was next-lowest at $87.19. Denver was tops at $105.53.

According to Smith Travel's year-end data, area hotels held up better than the competition in a down year.

--Areawide hotel occupancy was down 2.4 percent, better than the national average (down 4.2 percent) and rival cities including Nashville, Tenn., (down 7.5 percent), Minneapolis (down 6.0 percent), Indianapolis (down 4.2 percent), Denver (down 3.9 percent), St. Louis (down 3.6 percent) and Louisville, Ky. (down 2.5 percent).

--Overall, the area's occupancy rate slipped to 57.4 percent after hitting 58.9 percent in 2007.

Before the national economy began to sour last year, local observers were hopeful that occupancy rates for the area might climb past 60 percent for the first time since 2001.

But 3 percent growth in the area's supply of 30,800 hotel rooms simply outran the soft, 0.5 percent bump in total rooms rented, and pushed the occupancy rate down.

That small rise in demand compared with a 1.6 percent decrease nationally, and was stronger than rival cities except Louisville, which was up 2.1 percent. St. Louis was up 0.2 percent.

--The area's strongest hotel market last year was in Clay County. Occupancy was up 0.2 percent, to 66.8 percent, amid robust 8.8 percent growth in demand and despite an 8.6 percent jump in supply.

--Occupancy at hotels near Kansas City International Airport and others in Platte County was up 2.8 percent, giving that county a 69.7 percent occupancy rate.

--Occupancy at Westport and Country Club Plaza hotels fell 1.7 percent, to a 64.5 percent rate.

--The biggest percentage of empty rooms came in eastern Jackson County. Even though there was no increase in supply, occupancy fell 1.6 percent, for a 44.5 percent occupancy rate.

--The biggest drop came in Johnson and Wyandotte counties, where occupancy was off by an areawide high 8.5 percent, putting the occupancy rate at 55.7 percent. There was almost no increase in the room supply and an 8.4 decline in demand.

Operators there apparently slashed prices in 2008 to prime the pump, as revenue per available room plummeted 7.8 percent. Areawide, room revenues were up an average 2.3 percent.

Supply and demand

Here is a look at the Kansas City area's hotel industry performance in 2008. Occupancy rates move up or down based on demand for hotel rooms in relationship to supply, or total rooms available. If demand remains steady, for instance, an increase in supply will push the occupancy rate down. The demand rate reflects raw increases or decreases in the total number of rooms rented.

Location / 2008 occupancy rate / 2008 demand

U.S. average 60.4 %  / -1.6%
KC area average 57.4  / +0.5
All KCMO hotels 59.9 / +0.8
Downtown 56.0  / -1.6
Plaza/ Westport 64.5 / -1.7
KCI Airport/Platte County 69.7 /  +2.8
Clay County 66.8 / +8.8
East Jackson County/Stadium 44.5 / -1.6
Kansas portion of area 55.7 / -8.4

Source: Kansas City Convention & Visitors Association and Smith Travel Research

To reach Rick Alm, call 816-234-4785 or send e-mail to [email protected].

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