Pegasus - Hoteiers Getting Back To Business

2010-05-03

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Pegasus Rising occupancy rates over the first quarter, along with strong future booking volumes, substantiate that hotel demand seems to have turned the corner, especially in the business travel segment.

Future bookings through the GDS channel are up for five of the next six months compared to 2009. Additionally, GDS and ADS bookings for Q1 2010 outpaced comparable periods for 2007, 2008, and 2009. March bookings for GDS and ADS combined exceeded March 2009 by +7.96%, along with showing significant gains over March 2008 and 2007, up +19.91% and +27.18% respectively. Even more importantly, global GDS ADR is slightly up. This reveals the first glimmer of hope for the easing up of ADR declines.

While we see some improvement, the struggle for ADR still remains. It continues to lag and, in some regions, is even decreasing. “We’re seeing good recovery in the number of rooms being sold and average occupancy, and now an average daily rate that is starting to creep up. Do we expect it to return to 2008 levels? Not this year,” said Timothy O’Neil Dunne, Managing Partner at T2Impact Ltd. “As long as people are still somewhat concerned about paying their mortgages, or hesitant to ask for increases in their business travel budgets, they won’t be upgrading rooms or purchasing the extra services and concierge items that drove the level of revenues we saw in 2008.”

Looking at the numbers, ADR for March 2010 compared to March 2008 & 2007 is down by -12.16% and -7.3% respectively. Those hotels that plan ahead for the upswing in business should expect to begin increasing room rates to close the ADR gap. Marriott International reported in April that they are seeing “a strong uptick in business travel, boosting occupancy in the first-quarter this year and soon expected to be positioned to begin increasing room rates.”

Revenue shows positive growth for March 2010, coming in up +8.29% over 2009, +0.91% over 2008 and +10.97% over 2007. Overall, the first quarter of 2010 also compares favorably with revenue up +5.42% over 2009, down -6.99% over 2008 and up +5.58% over 2007. As previously mentioned, proper revenue and yield management strategies can help position hotels to begin raising rates and thus gross revenue.

Confirming that business has begun to rebound, most in the travel industry are expecting full-year 2010 to show positive growth, as has been indicated by first quarter 2010 results. “We are definitely seeing year-over-year growth and are very optimistic this will continue in 2010,” said Jason Harris, senior director for BCD Travel - Global Hotel Relations. With the positive movement in business travel, substantiated by future bookings, the coming summer leisure travel season should help determine if the current growth we have seen is sustainable over the long haul.

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