For the first time in more than five years, hotel room average daily rates posted a year-over-year decline for the month, according to Smith Travel Research, further evidence of the emergence of a buyer’s market for meeting planners.
Average daily rate, or ADR, dropped 0.5 percent in October compared to October 2007, declining to $107.60. It broke a 63-month streak of positive year-over-year monthly ADR numbers dating back to June 2003.
Only three segments of the hotel market that STR tracks saw ADR gains: midscale with food and beverage (up 1.1 percent), midscale without food and beverage (up 1.8 percent), and economy (up 0.3 percent). Despite October’s decline, ADR is still up 3.2 percent for the year through October.
Convention hotels, those with at least 300 rooms and 20,000 square feet of meeting space, were hit harder then most. For the year through October, ADR at convention hotels is up just 2.4 percent. Other key indicators were down sharply in October compared to October 2007. Revenue per available room, or, decreased 7 percent last month to $66.85, while occupancy fell 6.5 percent to 62 percent. All seven segments of the hotel market posted year-over-year losses in RevPAR and occupancy. Year-to-date through October, RevPAR is off 0.3 percent compared to the first 10 months of 2007, and occupancy is down 3.4 percent to 62.8 percent.
While a rate decline is probably good news for planners, how good remains to be seen. “We hope hoteliers learned their lessons during the post-9/11 time period that cutting rates in the short term only provides slight immediate help. It took the industry more than five years to recover from the price discounting that took place during late 2001 and the first half of 2002,” said Jan Freitag, vice president ofdevelopment at STR, in a press release.
Chad Church, manager, industry research at STR, stated in a release that this recession might be an opportunity for convention hotels in smaller markets to gain market share. Budget-conscious meeting planners will be looking for lower rates and may seek out smaller markets, which generally have lower rates than big markets.