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News for the Hospitality Executive |
Pinnacle Advisory Group Updates
2009 Projections
for Boston and Massachusetts
| March 30, 2009
Due to the length and magnitude of the recession and its impact on the lodging industry, Pinnacle Advisory Group has revised its outlook for the Massachusetts lodging industry and more specifically, the Boston/Cambridge lodging market for 2009. Pinnacle is projecting that market occupancy for Boston/Cambridge will decline by 7 occupancy points and that the market�s average daily rate will decline by 9.0 percent resulting in a 17.4 percent decline in Revenues Per Available Room (RevPAR). For the entire state of Massachusetts, Pinnacle is projecting that occupancy will decline by approximately 5 occupancy points to yield an average annual occupancy of 57 percent, while average room rate will decline by 5.9 percent. The combined impact will result in a 13 percent decline in RevPAR. While the projected declines for both the state and the city are significant, the statewide and city occupancy and average room rate will end the year at higher figures than the overall US lodging market. Statistics provided by Smith Travel Research show that during peak economic times, the Massachusetts statewide occupancy hovers in the high 60�s. But during the last two downturns (1991 and 2003), the statewide occupancies declined approximately 10 points to the high 50�s. According to Rachel Roginsky, ISHC, the firm�s founder, the impact to the lodging industry in Massachusetts will be similar to that of prior recessions. The rapidly deteriorating economic environment has led to significant cut backs in corporate travel. Also, job losses have affected demand from leisure travelers as they cut back discretionary spending. Furthermore, international demand, once a bright spot for the area, has declined in the face of the global economic situation and the rising value of the dollar. �All of these factors combined has caused a downturn in both demand for lodging, and the price that the traveler is willing to pay� said Ms. Roginsky. The outlook for 2009 continues to worsen for the hotels located in Boston and Cambridge. According to data compiled by Pinnacle Advisory Group and presented in the Pinnacle Perspective, the occupancy for Boston/Cambridge was down 10 occupancy points for YTD February 2009 compared to the same period in 2008. During the first two months of the year, average daily rate dropped 9.2 percent, causing RevPAR to decline 24.5 percent. According to Matt Arrants, ISHC, Managing Director for Pinnacle, �While the YTD statistics in Boston and Cambridge are severe, there are several positive factors to consider. First, new supply in the City will be relatively minor, with two hotels opening later this fall. Second, convention bookings are stronger in the second half of the year. Lastly, the first two months of the year are always the weakest from a demand perspective, which was compounded by a drop in convention demand and the financial crisis. As group demand picks up and we move away from the recent financial crises, we should see some minor improvements.� To summarize, Pinnacle Advisory Group is projecting that the Cities of Boston and Cambridge will finish 2009 at an occupancy rate of 69 percent (7 points lower than 2008) at an average rate of $192.40 (versus $211.40 in 2008). As a result, the Boston/Cambridge RevPAR will decline to $132.75 for year-end 2009. For the entire state, the 2009 occupancy will decline 7.5 percent to 57 percent, and average daily room rates will decline 5.9 percent to $133, resulting in a RevPAR decline from 2008 to 2009 of 13 percent. Pinnacle Advisory Group provides hospitality consulting services for industry investors, lenders and operators. Our clients include some of the country's largest real estate investment and development firms, pension funds, REITs, insurance companies, financial institutions and hotel companies. Since 1991, Pinnacle has provided advice and analysis on the full spectrum of hospitality properties: hotels, resorts, conference centers, food service operations, timeshare and other residential resort facilities, golf courses, ski slopes, marinas, and such public assembly facilities as theme parks, arenas, convention centers and exhibition centers. Pinnacle Advisory Group is a boutique firm that has earned a national reputation for excellence. Our highly knowledgeable staff, breadth of experience, and unrivaled industry exposure enable us to contribute to any hospitality venture. www.pinnacle-advisory.com |
| Contact:
Patricia A. Grant
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