Lodging industry may have a ‘decent’ year

May 17, 2010
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According to Smith Travel Research Inc., room revenue for the county’s lodging industry rose slightly for the first quarter of this year compared to the same period last year. STR reported that total revenue was $22.6 million for the year’s first three months, up by 2.4 percent from the $22.1 million recorded in 2009.

The average daily hotel room rate also crept-up from $85 to $86 a night.

Although the increases were eagerly welcomed by the Convention and Visitors Bureau and are being seen as potential catalysts that could lead the industry into a really good year, the news also came as a bit of a surprise.

CVB President Doug Small said a projection of the rooms that will be reserved this year is flat from last year because the bureau doesn’t see an increase coming from the convention business in 2010. In fact, the data the bureau used actually indicates that room nights booked by groups this year may fall a little from last year.

Still, there is another element to the local lodging industry —one that has been lagging for years.

“All the trends that we use to set our revenue projections were stating that we could have about a 3 to 3.5 percent increase in the individual traveler, whether that’s pleasure or business. I can tell you through the first quarter, because our group numbers have been flat, that 2 percent increase is due almost entirely to individual travelers — which is good, because that’s what has hurt us the last few years,” said Small.

“Group and convention held us together, while the transient business fell apart. But we’re seeing that (transient business) start to come back. I feel pretty good about our future because our group room-night pace for the future is really good,” he said.

Small said the long-range projection for room nights from the convention side of the ledger looks solid except for a few holes next year. The CVB set a record last year in the number of rooms it booked for the next few years. So if the individual traveler continues to make more reservations, the per-room price can rise and lodging operators will perhaps be in the best fiscal shape they’ve seen since 2001, when the terrorist attacks ripped a gaping hole in the hospitality and travel businesses.

Small feels fairly certain that travel to the city will be strong at least for this year because the bureau’s room-night forecast doesn’t include some summer events, such as the debut of the Michigan Summer Games in June. Small said that event, being put together by the West Michigan Sports Commission and sponsored by Meijer Inc., is expected to draw several thousand people here. A month later, the U.S. Open Table Tennis Championships will be played at DeVos Place and a couple thousand room nights are likely to be booked then.

“We haven’t even hit our leisure season yet. We’re going to launch our summer advertising in about a week. We’re going through all of our summer promotions now. So I’m feeling pretty confident that the summer is actually going to be pretty active, and I’m probably more excited about the fall,” he said.

“Between ArtPrize, the Princess Di exhibit and the Chihuly exhibit, which is getting great coverage and is bringing in people left and right, we really feel good about our leisure potential in 2010.”

As for the first-quarter occupancy rate, STR reported that it nudged up a tad to 47.5 percent from 46.1 percent in the first three months of 2009. Small said other markets may have higher occupancy but that’s been achieved by driving charges for a night’s stay down to points below the room rate here.

“Detroit’s occupancy, year over year, is up. But their rate is way down, which tells me they’re discounting to get people in. They’ve made the decision they’re going to put people in their hotels regardless of price. And we’ve felt that. We’ve competed with them on a couple of groups where we’ve lost purely because of rate,” he said.

STR reported that the average daily room rate in Detroit for April was $76.67, about $10 lower than the local rate.

STR files monthly reports on the county’s lodging industry. Small said those reports contain data that the bureau can “hang its hat on” because an overwhelming 90 percent of Kent’s operators share their numbers with the research firm. Other counties, he said, are likely to only have 70 percent reporting to STR.

“That’s kind of tough to go by. But when you’ve got 90 percent-plus reporting, then I feel pretty comfortable that we’re getting a pretty accurate number.”

Those first-quarter numbers, along with rising consumer confidence and a packed event schedule, have given Small a healthy dose of optimism for the industry this year.

“For the first time in a couple of years, I’m feeling really good about the leisure opportunity, and it’s a combination of two things. It’s a combination of people starting to feel a little more confident that they can go out and spend some money for leisure travel. I think it’s also the events that we have scheduled this year in Grand Rapids. If our group (business) pulls together and we’re correct on our projections for the leisure, I think we can end up having a decent year.”

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