STR's summer forecase predicts rate boost
27 April 2011

REPORT FROM THE U.S.-Finding a last-minute, deeply discounted hotel room might not be so easy this summer, industry experts predict.

Hoteliers have realized actual demand increases and are confident in driving rate this summer, according to STR's 2011 summer forecast, which predicts a 4.1% average daily rate increase for the summer months. The forecast-which was released today and comprises June, July and August-predicts summer occupancy will increase 1.7% from summer 2010 to 66.7%, ADR will increase 4.1% to US$103.01, and revenue per available room will end the summer up almost 6% at US$68.68.

"No matter how dire things are, that vacation is something families plan for," said Brad Garner, COO at STR, the parent company of HotelNewsNow.com. "The summer months are typically when the industry makes hay."

In July, typically the busiest month of the year for hotels, STR expects the total number of roomnights sold to eclipse the 100 million mark for the second year in a row. More than 100 million rooms were sold during July 2010 for the first time ever in a single month.

STR predicts year-over-year demand to rise 2.5%, compared to an 8.6% year-over-year increase during summer 2010 and a 6.4% year-over-year decline during the summer of 2009. Supply will remain muted, predicted to increase 0.8%. Revenue for summer 2011 is forecasted to increase 6.7% to US$30.9 billion, compared to a 10.1% increase to US$28.9 billion reported for summer 2010.

"We're bullish on summer," said Dorothy Dowling, senior VP of marketing and sales for Best Western International. "Consumer confidence has come back. If you look at all of the indicators, consumers are starting to loosen their wallets."

Resorts and leisure-driven markets typically outperform in the summer months, Garner said. He predicted Florida and New York to see high demand numbers, as well as many West Coast markets. 

"In general, the more leisure, family-oriented markets will probably do very well," he said.

Transportation costs
The hundred-million-dollar question for hoteliers this summer is what kind of effect oil prices will have on travel. 

Garner said the data would suggest there is no tight correlation between gas prices and hotel demand. However, travelers will be clever about the way they travel. 

"Maybe they won't fly, they'll actually drive," he said. "Flying would be a big burden on a family of five or six. They might be spending an extra dollar and a half on gas, but they'll be saving (US)$500 or (US)$600 on airfare."

Dowling said road travel is always a difficult thing to predict. She said corporations have studied the overall cost of the change in gas prices and that it equated to the price of a large pizza.

"With an average length of stay two nights, gas is the lowest overall cost of a trip," she said. "Gas has the smallest impact."

Chris McGinnis, business travel analyst and director of Travel Skills Group, doesn't think gas prices will have a significant effect. "People are going to say, 'If they pay more for gas then they'll pay less for lodging,'" he said. "We've been to (US)$4 a gallon before, and it hasn't been as shocking as we thought."

Many hotels will offer promotions this summer surrounding gas prices, such as offering a free US$50 gas card to travelers who stay two or more nights. Garner said promotions make sense in some context, as long as the hotel isn't discounting the room rate to do so.

"Promotions may actually work if they're done tactically and strategically," he said. "Don't discount the room, but once they're at the hotel, drive revenue to the bottom line."

Media Contact:

Jason Q. Freed
News Editor-Americas
jfreed@HotelNewsNow.com