Clearing up cloudy hotel outlook

If you’re staying overnight in places like Bakersfield, Calif., or Allentown, PA, there’s good news. The not-so-good news is if you are paying for a hotel in a larger city.
 

There are many conflicting reports on hotel room rates, which is a subject of much interest to both business and leisure travelers. But a new study by Smith Travel Research had some key highlights on the subject:
 

• Occupancies at hotels in small towns and near highways stayed essentially flat at about half-full in the first six months of 2010.
 

• In contrast, occupancies rose to 65 percent up from 61 percent a year ago in big cities such as New York, Chicago and Washington.
 

• Hotel companies such as Marriott and Wyndham have reported stronger financial results for hotels that tend to be in big cities.
 

• New York City hotel rates have been climbing since March, after almost a year and a half of declines. Also, New York’s hotels filled 79 percent of rooms during the period, vs. 56 percent for the U.S. overall.
 

"New York City is skewing the numbers," David Loeb, an analyst at Robert W. Baird & Co. in Milwaukee tells Bloomberg News. "Urban and suburban markets are doing the best while the others are recovering more slowly."
 

The 514 hotels in New York City account for just 1.9 percent of total US room supply – and yet their revenue share is nearly 6 percent, said Smith Travel Research executive Jan Freitag. When you exclude New York’s hotels, the average US hotel rate dropped by 2.7 percent; when you include them it dropped by 2 percent.
 

“At our New York hotels, we’re seeing an increase across all segments — on the leisure side from domestic and international travelers, particularly from the U.K., Asia and the Middle East,” said Kathleen Duffy, a spokeswoman for the company’s hotels in the city. “But business travel is also coming back, particularly in the financial industry.”
 

In another report, the hotel market in Europe and the US “appears to be stabilizing” overall, according to the business travel agency Hogg Robinson Group Plc.
 

“Globally, the hotel industry has shown signs of recovery in the first half of 2010,” Hogg Robinson spokeswoman Margaret Bowler said in the report.
 

The future:
 

Weak hotel demand in smaller cities is slowing the US hotel industry’s rebound, and hotels in smaller markets likely won’t be able to start raising rates before the summer of 2011, according to Freitag.
 

By David Wilkening