SURPRISE! Demand for High-End Hotels "Surges" In Third Quarter
Demand leaps back
to pre-crisis levels. The problem: Supply keeps coming.
Smith
Travel Research, the record-keepers for the hospitality industry, recently
announced a stunning development: a huge jump in room night demand for the
three highest priced hotel segments: luxury, upper upscale and upscale. "What
makes this turnaround even more dramatic," said Mark Lomanno, STR's president,
"is that it has gone largely unnoticed and ignored by both industry analysts
and the industry itself."
The
paradox, says Lomanno: "This demand rebound has been largely masked by very
high levels of supply growth, which have resulted in occupancy levels and
percent changes that have resulted in declining numbers...
While
many analysts have looked to the "midscale" categories for relief, they are in
for a rude surprise.
According to Lomanno, "Looking at the remaining segments
(midscale with food & beverage, midscale without f&b, and economy) the
picture is not as good - absolute demand levels are still significantly below
levels achieved a year ago, especially for midscale with f&b, and economy.
In those two segments, absolute demand numbers are still declining and have
shown no signs of a recovery. Hotels in the midscale with f&b have begun to
report improvement in demand but at levels still well below the peaks of last
year."
If
these trends continue through the year, says Lomanno, then it might be possible
for higher-priced hotels to "capitalize on the demand growth to firm up
pricing."
Commenting
on Lomanno's study on STR's site, Mike Thiele of Hideaways
International, a
luxury travel club, said this demand growth is a phenomenon where
luxury
accommodations "borrow demand from travelers who can now afford it.
When you can stay at the Ritz Carlton for the same price or not much
more than a 3- or 4-star property, why go lower? This puts a real
squeeze on
mid-level properties in that market for years and keeps luxury
properties
under-priced. Five-star properties may want to go slowly in raising
prices and
eliminating incentives until a recovery is more firmly established."
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