In 2009, the hotel industry was faced with a frightening problem – how do we recover from an unprecedented decline?
An all-time low dip of 35.4 percent in net operating income (NOI) stunned the hotel industry, one of many affected big-time by a sputtering national economy. Demand for lodging fell drastically, especially in big markets where group meetings and business accommodations pulled in big money.
Hotel managers across the country turned to one solution and as the calendar flipped to 2010, room rates came crashing down – and it worked. This year, the hotel industry is prepared to celebrate a speedy recovery and the average U.S. hotel will have a 5.6 percent increase in NOI. Not coincidentally, average daily rate for rooms is projected to dip slightly.
“Severe room rate discounting during the first half of the year has driven the quicker than expected demand growth in 2010,” said R. Mark Woodworth, president of PKF Hospitality Research. Demand growth for 2010 is projected to grow to 7.8 percent.
An article from USA Today details how hotels are reducing prices of luxury suites closer to regular room pricing in hopes of luring occupants to upgrade. For now, the hope is that by ignoring the stigma that these price reductions will devalue these rooms, the demand and profits will continue to increase.
Hotels are also getting creative and doing things it would not ordinarily do including offering room on executive floors to group customers and offering suite upgrades on a stand-by basis according to the USA Today report.
Another way hotels can speed up the process to a full recovery would be to advertise such offers and rates more aggressively with online marketing. As proven with the surge in online shopping this past Thanksgiving weekend, people are turning to the internet more to find what they want. A hotel offering a generous deal or one-of-a-kind offer would greatly benefit by reaching those consumers actively searching online for just that.
For the time being, the market appears to be clearing up and in less time it has taken some other industries to get back on track. As a result, room rates will likely soon rise again as the demand for lodging increases. But for this holiday season, travelers expecting to pay high end dollars for a quality stay could be pleasantly surprised.