The GDP growth outlook from the start of summer through August was disappointing, dropping from 2.5 to 1.8. However, one area where predictions for growth were relatively high was in the lodging sector. Results actually exceeded predictions largely due to significantly increased room occupancy and average daily rate (ADR). Both business and leisure travel are improving although group bookings have not fully recovered to pre-recession rates but are also steadily increasing.Economic Predictors and the Travel Industry
Initially, as the economy began to recover, increases in travel increased sharply by 4.8% in 2011. However, as the economic recovery slowed so did lodging recovery due to decreased travel, falling to 2.0% over the first two quarters of 2012 with further decreases expected in the second half of 2012. Yet it is anticipated that there will be a slight rebound in 2013 with 1.3% more rooms occupied than in 2012.As the short term economic outlook has taken a downswing and the travel industry is considerably tied to these predictors, predictions regarding lodging recovery rates for the second half of 2012 and 2013 were revised. This was largely due to the slower than predicted economic growth which affect the decisions of business and leisure travelers. This is especially true when slowed economic growth follows a multi-year recession, increasing concern over the actual future outcomes instead of predicted outcomes.People are less likely to rely solely on predictions especially projections that are long term. This is one main reason the travel industry has seen a decrease in long-term bookings, with many reservations made closer to the date of travel when personal and business budgets can be paired with current economic conditions. Leisure travel often may even be last minute, translating into trips closer to home that can be planned quickly and spontaneously.Factors Associated with Travel Growth and Lodging Recovery
There are different considerations related to the purpose for travel and ultimate destination. It’s important to determine where the majority of a hotel’s patrons are traveling from and the purpose of their trip. This helps improve the focus on current customer groups and generates a list of potential customer groups that could be targeted in the future.Business Travel – While hiring in many sectors was put on hold, this allowed companies to invest in equipment, technology and software improving revenue. In addition, several sectors key to the travel arena remained stable during the recession and have generated new jobs and increased capital including companies in professional and business services and financial companies. Yet uncertainty over upcoming elections has delayed some business decisions that could result in new jobs and growth and increased travel.Leisure Travel – The continued weakness in the job market is only partially offset by improving house values and government bail-out money. This has limited the recovery of leisure travel as concerns over future job status remain. Consumer spending is expected to gradually improve in 2013 which is a reflection of a stronger job market. This will help restore the leisure travel sector.International Travel – Oversees travel increased markedly in the beginning of 2012, with booking up by 13.4%. Yet reservations then began to decline and as of May, Year to Date increases were at 8.6%. While still a respectable percentage, the continued growth despite its slowing somewhat, could be accounted for by travelers from several counties. These include Japan, China, and Brazil, which are closely followed by Argentina, Venezuela, and Columbia.Easing the Visa Process – The rates of international visitors to the U.S. was helped by improvements in the Visa process for incoming visitors. The travel sector continues to push hard for visa waiver programs for additional countries.Factors with the Greatest Influence on Lodging Recovery RatesWhile overall economic recovery is important for travel and general predictors of stability, certain factors and demographics have more of an effect on lodging recovery than others.Higher Income Households – Over half of consumer spending on lodging is accountable for by households in the top fifth income bracket.Individuals Working as Managers or in Professional Positions – As employees in these positions were less affected by the recession displayed by significantly lower job losses occurring in these areas than others. Concerns over job loss may have still been high as was the case across the board which resulted in somewhat conservative spending. However, as the recovery has continued albeit more slowly than anticipated, Managerial and Professional employees now feel more certain about job security which is resulting in increased willingness to spend money on travel.Education – Employment rates and new hires have been significantly higher for individuals with a college degree than those without one. This indicates those more likely to have the income to allow travel are more educated than those who aren’t able to travel.Lodging Recovery IndicatorsSimilar to much of the economy, the travel industry has been slowly recovering with increases expected to grow faster beginning in 2013. Yet general lodging indicators are still more positive than negative.Supply – Construction rates of new hotels largely ground to a halt beginning in 2011. Combined with the number of hotels who closed due to bankruptcy or other financial problems has decreased the number of rooms available. Construction is expected to pick up in coming quarters with new room growth rates for 2012 predicted to be.5% and.7% for 2013.Occupancy – Travelers are increasing and as is the demand for lodging. Room occupancy has surpassed even its pre-recession height and the average number of daily room night’s occupancy during the end of 2011 was 5.9% greater than the rates in 2007 when occupancy was at its former peak. However, as supply is 7.9% greater than in 2007 the occupancy rate for 2011 is actually below that of 2007. Yet with increasing business and leisure travelers predictions for 2012 are significantly more positive.Room Rates- While luxury upscale occupancy for 2012 is predicted to meet or exceed the occupancy rate for 2007, ADR was more affected by the recession than lower priced lodgings. Thus, while it appears that luxury hotels have maintained occupancy rates throughout the recession to date, their overall revenue per available room (RevPar) was negatively affected while the lower priced hotels were able to maintain their RevPar regardless of lower occupancy. Thus, occupancy rates don’t tell the whole story of impacts of the recession on lodging or lodging recovery.ADR – Current reviews of bookings for room rates across the price range for group and individual reservations indicate that with active and efficient management ADR for will increase from previous increases in 2011 of 3.7%, to 4.6% in 2012,and 4.9% in 2013.Conclusions and Recommendations
Lodging recovery looks promising in the year 2012 so far appear to be born out and should the economy rebound as predicted forecasts for 2013 should also fulfill expectations. Yet a cautious outlook is warranted as the experiences of the recession are still fresh and far from distant memory. This means that travelers will still be wary of risks that could return the country to a state of recession wanting to keep cash revenue in reserve just in case the unpredictable happens.Trends and contributing factors related to lodging recovery should be fully examined and understood for different segments of the sector so as to be able to take advantage of variables that can affect lodging recovery overall and recovery for your individual establishment. Analyzing trends and using the results to lead timely developments can also help draw customers, even in a slow growth economy.Lodgings should keep a close eye on booking patterns for different times of the year and/or seasons, and analyze data collected from consumers both in person for the individualized touch and online. A crucial component often neglected to respond to all feedback received. For comments received in person, send notes to each individual, thanking them for their business.When positive feedback was received thank them for their kind comments adding you hope to see them again soon. If the feedback was negative, mention that you appreciate their feedback and are working to improve the area detailing how you are doing that. Let them know you appreciate their comments and are always striving to improve the hotel’s service and amenities.If the feedback is provided online this is an opportunity to open a conversation with not only that customer but potentially other customers as well. This is especially true with negative feedback. Ask for a clarification of the problem and problem solve with the guest as to how best to fix it indicating your intent to put the plan into action. This shows everyone reading the exchange that the management of this hotel listens to their customers and takes their opinions and feedback seriously.While all the techniques to help individual and chain hotels achieve faster recovery and increased revenue cannot be discussed in the confines of this article, there are numerous methods of improving your occupancy rates, ADR and RevPar. Yet given the continued concerns over the state of economic recovery, turning to professionals who have the expertise and experience to help your hotel make it through almost any economic conditions can make the difference between surviving and going under.Enlisting the help of the best hotel management company for your specific lodging can establish and maintain your businesses position and status above that of its competitors. Additionally, a top rate hotel management company should be flexible, providing whatever level of involvement and consultation your management and staff may need, changing their level of involvement as deemed appropriate or necessary at different junctures.With quality hotel management companies available, you don’t have to wade through the vast amount of important information, determine the best strategies for your hotel and put them in place and weather the uncertainties of lodging recovery on your own.