Industry trends should “present a number of challenges” to meeting planners, says Bjorn Hanson, global industry partner, PricewaterhouseCoopers Hospitality and Leisure division, including higher occupancy rates, which will make room availability “an even greater problem in 2006.
“There's less availability and higher rates,” says Hanson, confirmation that the industry is still in a strong seller's market. Hanson was referring to findings contained in PricewaterhouseCoopers' “2005 U.S. Lodging Industry Briefing,” released in December.
While overall occupancy rates are below the long-term trend line of 66.5 percent, by the end of 2005 they had bounced back to 64.7 percent. This is well above the 59 percent reached in 2002 when the industry was attempting to recover from the twin hits of recession and 9/11.
PWC forecasts that occupancy rates will continue to rise through 2007, an increase that will also be reflected, Hanson says, in the upper upscale and luxury units that are important to meeting planners. Rates across the industry are expected to rise 5.1 percent, with the upper upscale and luxury units seeing a jump of 6.5 percent.
Increasing demand is just one of the reasons planners will be facing higher rates this year, according to Hanson. “Hotel owners have made substantial investments in upgrades over the past three or four years,” he says. “And now they are looking to recover those costs. Also, resistance levels are surprisingly low — there was very low resistance [among consumers] to efforts to put in large rate increases in 2005, so hotels will be even more aggressive in 2006.”
Hanson also says the lodging industry reaped $1.4 billion in revenue from surcharges in 2005 — charges that also account for the higher rates meeting planners are experiencing. For example, one of the new surcharges is a “baggage holding fee,” Hanson says. “It used to be that if you had a checkout time of 12 p.m., but had a meeting in the afternoon, you could leave you bag with the bellman for the price of a gratuity of some kind. Now you're seeing a baggage holding fee and other fees like mini-bar restocking charges.”
The report predicts record profits in 2006 for hotel companies — $29.7 billion compared to $25.2 billion in 2005, another record year.