When Pat Economos of La Grange Park, Ill., went looking for a quick golf getaway this summer, the first thing she did was call the Wisconsin resort she’d stayed at more than a decade ago. Back then, it cost $90 per person per night, which included a room, dinner and breakfast and unlimited golf.
This summer, however, the semi-retired purchasing agent was shocked to discover the rate was $250 per person — that is, until she inquired about midweek prices and was offered a nightly rate of $110. “I’ve always been budget minded,” she says, “and two nights midweek are costing us less than one night on the weekend.”
Welcome to the world of lodging and hospitality circa summer 2008, where being flexible and inquisitive may provide some relief from high gas prices, exorbitant airfares and continuing economic uncertainty. Assuming you can afford to get where you’re going, there are even some deals to be had once you get there.
Booming construction, weakening demand
Even as the economy falters, hotel construction is booming in the U.S. Currently, there are approximately 4.5 million hotel rooms across the country, with at least 100,000 more expected to come on line this year, an increase of 2.2 percent. “It’s the largest number of rooms under construction since 2000,” says longtime industry analyst Bjorn Hanson.
The problem — for the industry, not consumers — is that demand is expected to grow a mere 1 percent, pushing occupancy rates down. “It’s not because there are fewer travelers, but rather more hotels,” says Jan Frietag, vice president of global development for Smith Travel Research. “The number of rooms sold is actually up 0.1 percent for the first five months of the year.”
That, in turn, has helped prop up ADRs, the industry metric for average daily room rates. In May, the national ADR was $108, up 4.5 percent from May 2007. However, compared to annual increases of six percent in 2006 and seven percent in 2007, the rate of growth is clearly slowing. In fact, in some places, it’s already turned negative.
What happens in Vegas?
Las Vegas, for one, is getting a firsthand look at what happens when a slew of new hotels get built just as travelers start cutting back on their discretionary spending.
“I’m looking out my window, and there are cranes everywhere,” says Anthony Curtis, president of LasVegasAdvisor.com, an online newsletter. “CityCenter, Fontainebleau, Echelon — their [construction] budgets may have increased, but they’re still going up.”
And they’re not alone. This year, Las Vegas’ hotel base is expected to grow by 8,800 rooms with an additional 16,800 rooms on tap for 2009. Together, that will bring the city’s total to more than 158,000 rooms, a 19-percent jump since 2007.
Meanwhile, the number of visitors is declining. In May, 3.99 million people flew in and out of McCarran Airport, a 4.7 percent drop from a year earlier. During the same period, the average daily traffic on the major highways into the city was down 6.4 percent.
Hoteliers are clearly concerned. Surveying 84 of the area’s casino-hotels, LasVegasAdvisor.com found that 47 were quoting available rates of $50 or less in July, up from 29 the year before. Even high-end properties, including Luxor, MGM Grand and Mirage, among others, were offering rates below $90 per night.
Clearly, Las Vegas is an extreme example, and hotels in other destinations won’t be offering such deep discounts any time soon. In New York, for example, international visitors will likely keep hotels full and pricey thanks to the anemic value of the dollar. “Any doorman will tell you,” says Joe McInerney, president of the American Hotel & Lodging Association, “they come with one suitcase and leave with four or five.”
Other markets are also resisting discounting. Hotels in Chicago, for example, are maintaining high ADRs thanks to meetings and conventions that were booked last year, while those in Orlando are seeing strong demand from in-state travelers who are staying closer to home. How long they can continue to do so will depend on how two major trends play out.
On the one hand, the combination of more rooms, higher energy costs and weakening demand means hotels are going to start facing what Jan Frietag calls “a heavy headwind.” On the other, he says, “Leisure travelers have a firm belief in life, liberty and the right to travel. They may not go as far, they may not go as long, but they will go.”
New chains for next-gen travelers
Specific destinations aside, travelers are also benefiting from the recent proliferation of hotel brands — 35 in the last 35 months according to Bjorn Hanson. Many are being developed by major players, such as Hyatt and Starwood, who have plans to roll them out by the hundreds over the next several years.
Among the most buzz-worthy are the so-called “boutique brands,” such as Cambria Suites, Hotel Indigo, Hyatt Place and NYLO, that are springing up across the country. Combining hip design and high-tech amenities, they feature Starbucks-like lobbies, free wi-fi and an ambience geared toward travelers who grew up with iconic innovators such as JetBlue and Ikea. (You don’t have to be under 35, but it helps.)
Last month, for example, saw the long-delayed opening of the first aloft hotel, the new chain from Starwood Hotels. “Infused with the DNA” of the company’s W Hotels (and, yes, spelled with a lower case “a”), the chain will forgo room service and valet parking in favor of grab-and-go pantries, self-service kiosks and average rates of $150 per night. Four alofts are currently open — Lexington, Mass.; Rancho Cucamonga, Calif.; Rogers, Ark.; and Montreal, Quebec — with another 80 in the works worldwide.
With so many companies jumping on the boutique-chain bandwagon, industry experts expect to see increased price competition. “A lot of these chains didn’t exist one or two years ago,” says Frietag. “They’re offering more attractive rates just to get people in the door.”
Ask and you may receive
Many established hotels, on the other hand, are continuing to resist cutting rates this summer (at least outside Las Vegas). Many, suggests McInerney, would prefer to sacrifice occupancy rates, letting a few rooms go empty rather than slash rates as they did after September 11.
Instead, they’re hoping to entice guests with add-on amenities and extra services that offer more value instead of a lower price. “They’re putting together packages that tie in to cultural events and local festivals,” says Hanson, “paying admission or providing transportation.”
But, he cautions, they don’t always spend the money to advertise such deals, leaving it up to guests to ask what might be available. Whether it’s complimentary shuttle service or a free upgrade to a Club room (complete with Continental breakfast and afternoon cocktails), guests can take some of the sting out of their bill with a few friendly questions.
And, of course, by being flexible. “People tend to be reluctant to try different days,” says Hanson. “They want to arrive on Friday and leave on Sunday, but if they ask about Wednesday to Friday or Sunday to Tuesday, they’ll often receive a much lower rate.”
That’s what Pat Economos did, and although she’s not expecting a luxury experience, she’s excited by the prospect of a clean room, decent food and unlimited golf at a reasonable price: “I’m happy to stay in a two-star hotel. I don’t spend much time in my room anyway.”