The seller’s market may be softening—in some locations.
Marriott International's second-quarter profits fell by 24 percent and second-quarter profits at Starwood Hotels & Resorts Worldwide fell by 16 percent. Planners want to know: Is the long-running hotel seller's market finally over?
It all depends on the location, says Bjorn Hanson, clinical associate professor at New York University's Tisch Center for Hospitality, Tourism, and Sports Management. “Markets like New York still have occupancy rates of over 80 percent. It's still a seller's market there.”
Jan Freitag, vice president for global development at Smith Travel Research, agrees that “the top 10 markets are still going to see a seller's market.” Secondary locations, however, particularly those with a lot of new properties in the pipeline, will give planners “easier negotiating opportunities.”
Second-quarter numbers were “slightly weaker than anticipated,” says Hanson, but observers need to remember that in autumn the hospitality industry begins to rely more on business travelers than leisure travelers. “And business travel has held up surprisingly well — better than expected,” he says.
“Business has already reacted to the cost of travel,” adds Hanson. “What we do see happening is that companies are cutting back on small meetings, the kind that have 10 to 15 attendees. Instead they're using teleconferencing or videoconferencing or using office space. For larger meetings, they're sending fewer attendees for fewer days.”
Freitag says there are opportunities out there for planners beyond room rates. “From a group perspective, I think there's an opportunity to negotiate up,” he says. “Instead of having to pay for bottles of water or Internet service in addition to rooms, there should be opportunities to have those services incorporated in the room rate.”