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Hotel Industry Enjoys Rebound Occupancy Levels, Room Rates Rising After Long Slump

Sat., March 25, 1995

Once upon a time, hotel rooms were plentiful across the land. No matter the time of year - summer, convention season or Christmas - travelers often could book the suites of their dreams on a moment’s notice and have hotels clamoring to undercut one another in price.

Those days are over.

The word in the industry this year is if you want to travel, book rooms well in advance and don’t expect big discounts.

“The industry is now in its best shape in 15 years,” said John Rohs, a securities analyst with Wertheim Schroder.

The robust domestic economy has put more money in the pockets of both leisure and business travelers, increasing demand for hotel rooms, especially at peak seasons.

The change is welcomed by an industry that suffered through years of occupancy levels that hovered down around 60 percent, said Randy Smith of Smith Travel Research, which tracks the industry. “We’ve finally worked off the excess capacity of the 80s.”

During the last decade, hotels were being built at far faster a rate than the demand for rooms. Cash flowed from savings and loan institutions into the hands of “hotel-happy” investors, eager to build, build, build.

The number of hotel rooms normally grows by 1.4 percent a year, according to Rohs. But 566,000 rooms were added to the hotel stock across the country between 1985 and 1990 - a 23 percent total increase over what was built in the previous 35 years, he said.

By 1989, when the impact of recession and S&L; failures began to be felt, “the end result was pretty ugly. By 1991, most hotels nationwide were losing money,” said Rohs.

Smith puts those losses at close to $10 billion in ten years.

Corporate downsizing during that period also hurt the industry, said Frank Camacho, director of sales and marketing for ITT Sheraton.

But “that part of the business seems to be coming back,” he said, adding that faxes and e-mail have not diminished the need for face-toface business meetings.

As a result, Camacho said Sheraton’s nationwide occupancy levels rose 4 percent in 1994 and are up 5 percent already in 1995.

Last year, Holiday Inns were 70 percent full, partly due to more business travelers and partly to heightened consumer confidence, said Craig Smith, spokesman for Holiday Inn Worldwide.

“People are taking more little pockets of vacation time,” Smith explained.

Robert Dirks, a senior vice president of marketing for Hilton Hotels, also credits an anemic U.S. dollar with attracting a larger international clientele.

“The dollar’s weakness is working to the hotel industry’s advantage,” said Dirks. “That and the competitive air fares. It’s a bargain. People stay longer, too.”

Hotel rooms, however, aren’t quite the bargain they once were.

Most industry executives could not give specific rate information because the variables such as season, location, availability and type of room affect rates. But Camacho said that three years ago, most major hotels were forced to offer across the board discounts from 35 to 50 percent.

“Today, it’s much more common to see 10 to 20 percent discounts, if any at all,” he said.

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