In fact, half of the major market cities in the U.S. have revenues per available room (RevPAR) ratios that are either lagging the U.S. average over the past three years, or decelerating. For meeting planners, that means negotiating power, says Bjorn Hanson of PricewaterhouseCoopers LLP, author of the newly released State of the Lodging Industry report. According to the report, Houston, Philadelphia, and St. Louis saw RevPAR ratios decline from 2002 to 2003. Several major markets—Atlanta, Boston, Dallas, Denver, Detroit, Minneapolis, New Orleans, New York, Orlando, and San Francisco—had RevPAR performance that was lower than the U.S. average from 2000 through 2003.
In 20 cities out of the 26 surveyed, room demand has decreased. San Francisco and Dallas, with drops of about 18% and 13% respectively, were the hardest hit. Supply, on the other hand, increased in every major market except Oahu from 2000 to 2003. New Orleans had the highest growth in supply at about 17%, followed by Anaheim with about a 14% jump.
However, the hotel industry is shifting into recovery mode, according to the Hanson, and hotel room occupancy rates are projected to go from 59.3% in 2003 to 61.2% in 2004. RevPAR is expected to jump 5.2% in 2004, following an increase of just 0.3% in 2003, and hotel profits are expected to rise 15.9% in 2004 after declining 3.9% in 2003. Upscale and upper upscale hotels will lead the charge, he says.
For meeting planners, this upward trend may ultimately mean higher rates for rooms booked in 2004—and less interest in group business. Hanson projects an average room rate increase for groups of about 2% for 2004, as meetings and conventions become a lower priority for hotels. Says Hanson,
"The perceived balance of power between hotels and meeting/convention planners will shift in most markets back to the hotels."—Dave Kovaleski
