INDUSTRY OUTLOOK: HOSPITALITY
Could the month of October be a sign of things to come?
Consider Collier County, which includes tony Naples and Marco Island on the southern end of the Gulf Coast. Revenue per available room in that area rebounded 16.4% in October compared with the same month a year ago.
Revenue per available room, referred to by its initials “Revpar” in industry parlance, is an important gauge of financial health because it is a function of occupancy and average daily rates. Hoteliers are forever balancing occupancies and rates to maximize revenues.
In recent difficult years, hoteliers have slashed rates to boost or maintain occupancies, sacrificing room revenues in the hopes that guests would make up lost income by buying more food, spa treatments or rounds of golf.
But in some areas such as Collier County, hoteliers are beginning to consider boosting average daily rates to take advantage of healthier occupancies. If October's numbers hold up through the busy tourism season through April, 2011 could turn out to be a better year than some expect.
“I think we're definitely going to see some improvement,” says Fred Hirschovits, president of Twenty/Twenty Worldwide Hospitality, citing strong October numbers at the Naples hotel his company manages, The Inn at Pelican Bay. “Our hotel did fabulous,” he says.
“We've seen a rebound in occupancy levels to pre-economic downturn,” says Bruce Seigel, director of sales and marketing or Ritz-Carlton Resorts of Naples. “The return of demand will force pricing.”
Few hotels have been built in the Naples area in recent years. “So now that the rebound has started, it's starting to show more than it would in Fort Myers,” Hirschovits says. “In Fort Myers, there was a huge amount of supply that came in.”
That's a key point, because not every area of the Gulf Coast is likely to experience resurgence in occupancies and rates. “I expect Clearwater and Sarasota to be better, but I don't expect Fort Myers to be better at all,” says Dennis Reed, senior vice president for the Southeast region of The Plasencia Group, a Tampa-based hotel-consulting firm.
“Business has been very good on the island,” says David Teitelbaum, president of Ana Maria Resorts in Bradenton Beach and vice chairman of the area's tourist development council. But despite expectations of a 15% increase in business next year, Teitelbaum says guests remain vigilant about value. “We're not raising our rates,” he says.
Many hoteliers expect 2011's occupancy rates to rise, but the challenge is that leisure travelers and groups are now accustomed to booking at the last minute. That means hoteliers often don't know whether their hotels will be full or not a few weeks ahead of time and will lower rates to fill rooms.
“When we finish the first quarter, our numbers will be better on occupancy,” says Tony Lapi, president and CEO of Tween Waters Inn and chair-elect of Visit Florida, the state's tourism arm. “The average daily rates are taking a hit.”
Competition remains fierce for that last-minute traveler or group. “Everybody wants a deal,” says Lee Weeks, the CEO of Coral Hospitality in Naples. “We don't want to do what happened after 9/11,” he says, referring to the big rate cuts in the last recession.
“The average rate is killing us,” says Jason Parsons, general manager of the Naples Beach Hotel & Golf Club. While business in Naples rebounded in the fall, last summer's rates in Naples fell below $80 a night. “It was unheard of,” he says.
It's the same in the Tampa Bay area, where rates will only rise when hoteliers are certain that occupancies rise.
“Rates are going to be behind the times for at least another year and probably two years,” says George Glover, the CEO of BayStar Hotel Group in Tampa. In the Tampa Bay region, the company owns and operates the Indigo Hotel in downtown St. Petersburg and the Holiday Inn Express and Suites and the Hampton Inn, both in Largo.
But there is reason to be optimistic. “The demand for hotel rooms seems to be improving,” Glover says. “We do see a 40-watt bulb at the end of the tunnel.”
That light may be brighter in Collier County.
“We are seeing an upward trend in all segments,” says Seigel. What would boost business further would be nonstop airline service to Fort Myers from the West Coast of the U.S. “It would be worth a couple thousand room nights a year because groups choose Miami and Orlando instead,” Seigel says.
Already, airlines boosted capacity to Gulf Coast airports before the winter season started in November. For example, passenger traffic at Southwest Florida International Airport rose 13% in October compared with the same month a year ago.
A favorable outcome to the elections is welcome, hoteliers say. “There's more of a can-do attitude, at least with state government,” says Glover. “Florida's a great state, but sometimes we sit around and commiserate versus getting things rolling.”
This confidence could spur individuals and businesses to spend more on travel next year. “This election is going to help because people have new energy,” says Hirschovits. “It doesn't matter what side of politics you're on.”