Hotels have been particularly hard hit by the bad economy. Not only are people cutting back on leisure travel, but business travel, the bread and butter of the hotel industry has suffered tremendously, too. However, it does appear that at least one analyst is predicting an upturn for 2010.
Smith Travel Research is forecasting that hotel revenue and occupancy will make a recovery by the end of 2011. Their report, which was released last week, stated that 2010 still was going to be tough with occupancy and revenue still posting numbers in the red. According to the report, 2009 will end with occupancy at -8.8 percent and 2010 with -0.2 percent. In 2011, however, they predict that the number will actually rise 2.4 percent.
One big part of the reason that recovery is predicted is that hotel development is at a standstill, so there will be little or no supply growth. This flat supply will allow revenue per available room to increase by 2011, simply because demand will be higher. Revenue per room is expected to rise 5.5 percent in 2011, after a drop of 17.1 percent in 2009 and 3.6 percent in 2010, according to the forecast.
Smith Travel Research doesn’t appear to be alone in its prediction, either. Both The Conference Board and the International Monetary Fund are predicting that 2011 will have modest growth after a disappointing 2010. However, the Smith Travel Research report does shed some important light on the situation that hotels now find themselves in. It’s clear that some of it is simply over growth and overbuilding in the last few years. Such over building when credit was easy to come by has now created a glut of hotel rooms in major cities, reducing the revenue per room rate significantly.