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This Industry’s Rebound Points to a Recovering U.S. Economy

July 28, 2010 | About:

When you’re traveling, what’s your preference when it comes to accommodation?

After a lengthy, recession-induced downturn, the latest industry figures suggest that more Americans are choosing hotels.

Bjorn Hanson,dean of the Preston Robert Tisch Center for Hospitality, Tourism and Sports Management at New York University, projects that average hotel occupancy during the busy June-August period will rise to 63.5%. That compares with 60% in June-August 2009. Quoted in the New York Times, he describes that increase as “dramatic,” stating that, “Typically, the movement would be 1%.

Breaking it down further, Hanson estimates that business travelers will fill 6% to 7% more hotel rooms this summer than last year, while tourist occupancy will rise by 5% to 6%.

Increased hotel occupancy is just one barometer of the economic recovery. It seems the pickup in demand stems from both an economic upturn, as well as business travel driving the hotel industry’s rebound.

The Hotel Industry’s Double Play: Rising Occupancy and Room Rates

As Smith Travel Research confirms: “The more expensive hotels are recovering the fastest – and will continue to do so as business travelers come back.” Indeed, Marriott International(NASDAQ:MAR) says its Ritz-Carlton brand enjoyed a 15.9% jump in revenue per available room during the second quarter.

And while Smith Travel says occupancy rates are currently running at 55.8%, compared with the 63.1% peak in November 2007, room rates are rising, which is helping fuel the recovery. It estimates that the average room rate for business travelers this summer will be about 1% to 2% more than last year, while tourism/leisure guests will pay around 3% to 4% more.

And if you want to grab a last-minute room in New York, expect to pay 10% to 15% more than last summer. The firm predicts similar increases in Los Angeles, Boston, Washington, San Francisco and Miami later this year.

With demand increasing and room rates rising with it, hotels can now afford to be bolder with their pricing during peak periods, so you may not see as many great deals as before. One site I like is Travelzoo (NASDAQ:TZOO). The company sends a free weekly e-mail with its “Top 20″ travel deals (airfares, hotels, car rental, etc.) from across the sector each week. Some of them are excellent, so they typically don’t last long, though.

I’ll continue to monitor the hotel industry’s upturn throughout the rest of the summer and beyond, as it’s a key barometer of both business and leisure travel – and the strength of the wider U.S. economy.

Best regards,

Martin Denholm


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