ICP recently caught up with Bjorn Hanson, PhD,industry leader for PricewaterhouseCoopers' Hospitality & Leisure Practice, to get his perspective on what lodging will look like in 2003 and beyond.
Q: How hard-hit is the hospitality industry by today's economy?
A: A little change can make a big difference these days. Our current forecast for 2002 is 59.5 percent occupancy, and our forecast for 2003 is 60.1 percent. While it is statistically significant, it's a very small movement.
Revenue per available room decreased by 7 percent in 2001. Our forecast is for it to decline a further 2.3 percent this year, and then we see an increase in 2003 of 3.5 percent. That sounds like great news, but it really isn't, because if you add the two prior years together, you get a total two-year decline of 9.3 percent. If there is a war, there might be another 10 pointdecline on top of what we have in our forecast.
Q: What type of hotel is likely to come back first?
A: The high-end properties will recover more quickly, but that's because they've suffered more. Upscale hotels had a 2001 RevPAR decline of 11.6 percent. Our forecast for 2002 is a further 2.7 percent decline. So the past two years have meant a decline of 14.3 percent for upper-tier hotels.
Q: What negotiating ideas are working best in this environment?
A: [Planners are getting] other concessions from the hotel instead of trying to knock the last $2 or $4 off the room rate. Maybe they don't pay for meeting rooms, or get a certain complement of rooms that are comped. So they're trading things that are very expensive for the meeting planner but aren't that expensive for the hotel. Flexibility in dates can help, but there are tremendous regional variations.
Q: How are the market conditions impacting what hotels offer groups?
A: Some hotels are struggling financially, and there are reductions in service and reductions in investment in repairs and maintenance. If you go on a hotel inspection, look a little more closely for threadbare carpets. If a meeting is being planned for two or three years out, and the hotel is due for a renovation, make sure that it's written into thethat the rates agreed to are subject to that upgrade being completed.