Tuesday, November 11, 2008

Hotel Occupancy Rates Expected to Decline Sharply

by Bill McBride on 11/11/2008 05:01:00 PM

"In early October, we reported our third quarter earnings results and also provided observations about business for the rest of 2008 and into 2009. At that time, we expected business in late 2008 and 2009 to decline, but in just the last few weeks our business outlook has further weakened."
Bill Marriott, CEO Marriott Hotels (emphasis added)
From the USAToday: Most hotels likely to see occupancy rates fall next year
In its 2009 forecast — completed in September, but revised after the stock market collapsed in October — PKF Consulting of Atlanta expects hotels to fill an average of just 58.3% of rooms, or a 4.4% drop in the occupancy expected this year. If true, that would be the worst occupancy rate at U.S. hotels since 1988, when Smith Travel Research started tracking the data.

The current lowest occupancy rate, according to Smith Travel, was 59% in 2002 — the first full year after 9/11, the start of the Iraq war and the SARS epidemic. Separately, Smith Travel's revised forecast is for occupancy to drop 3.5% in 2009, to 59.1%.

"Toward the end of September, it was as if somebody, somewhere, hit the pause button," says Mark Woodworth, president of PKF Consulting.
Restricting travel is a common response to a sudden slowdown in business. And along with falling demand, new investment in lodging is up over 200% from just two years ago! Falling demand and rising supply; a bad combination for the lodging and hotel construction businesses.