U.S. hotel performance takes a dive

The U.S. hotel industry posted declines in three key
performance measurements during the week of 9-15 November 2008, according to data
from STR.
In year-over-year measurements, the industry’s revenue per available room fell 13.2
percent to end the week at US$59.78-down from US$68.86 during the comparable week in
2007. The U.S. hotel industry’s year-over-year occupancy rate fell 11.6 percent to
finish the week at 56.3 percent (63.7 percent in 2007). Average daily rate dropped
1.7 percent to end the week at US$106.26 (US$108.15 in 2007).

“It is disappointing and certainly worse than we expected,” said Mark Lomanno,
president of STR. “The deteriorating economic conditions have become so pervasive
that it is affecting all areas of travel-nearly all of which have an impact on
hotels.

“Having said that, we expect the worst to be over in the second quarter of 2009, and
we expect improvement in the overall hotel industry performance in the second half
of ‘09,” he added.

One bright spot for the week ending 15 November is that 11 of the Top 25 markets
showed year-over-year increases in ADR: Atlanta, Georgia (+6.0 percent); Chicago,
Illinois (+0.7 percent); Denver, Colorado (+4.1 percent); Houston, Texas (+12.2
percent); Nashville, Tennessee (+5.3 percent); New Orleans, Louisiana (+10.1
percent); Philadelphia, Pennsylvania (+2.6 percent); Phoenix, Arizona (+2.0
percent); Seattle, Washington (+0.6 percent); St. Louis, Missouri (+3.8 percent) and
Washington, D.C. (+3.2 percent). Hotels in San Diego, California, reported a flat
ADR performance for the week. With the exception of Houston (+29.2 percent), New
Orleans (+14.9 percent) and St. Louis (+1.2 percent), all Top 25 markets experienced
RevPAR declines for the week.

“We remain steadfast in our belief that hotel operators who go to all lengths to
hold their rate in this environment will have better strategic options available to
them when the economy begins to turn around,” Lomanno said. “We believe that
discounting rate does very little to create incremental demand. Discounting should
be the course of action only when all other options are exhausted.”
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