IE 11 is not supported. For an optimal experience visit our site on another browser.

Business group travel seen boosting hotels in 2005

Travel demand by business groups, if not convention business, is expected to pick up speed this year, driving U.S. hotel revenue and profits higher, according to hotel executives attending a lodging conference held Wednesday.
/ Source: Reuters

Travel demand by business groups, if not convention business, is expected to pick up speed this year, driving U.S. hotel revenue and profits higher, according to hotel executives attending a lodging conference held Wednesday.

"Group sales are typically slower to recover than other segments, but we are seeing that now," said Douglas Geoga, president of Hyatt Corp.

Since the Sept. 11 attacks of 2001, the leisure traveler has been the foundation of hotel occupancy in the United States. While Monday, Tuesday and Wednesday nights were not filling up, explained Joseph McInerney, chief executive of the American Hotel & Lodging Association.

"Now, hotels are starting to sell out Monday through Thursday and demand for weekends is strong," as people continue to take shorter vacations, the trade group leader said.

Big hotel chains say the trend is enabling them to raise prices.

"We are seeing a move out of third parties like Priceline or Travelocity and the business is being replaced with big customers that are buying banquets and conference services," said Matthew Hart, chief operating officer of Hilton Hotels Corp..

He said the trend is likely to continue "as long as people don't start building big, full-service hotels."

PricewaterhouseCoopers estimates that revenue per available room, a combination of room prices and occupancy that is the benchmark of lodging industry health, rose 7.5 percent last year and will rise 7.3 percent in 2005.

There is a perception, however, that a recovery in convention business remains elusive.

"Where I do have concern is with major convention-affiliated hotels - those are much slower to recover," said Fred Kleisner, chief executive of Wyndham International.

Francis Cash, chief executive of mid-scale hotel operator La Quinta Corp., said his chain was able to negotiate price increases last fall - for the first time in several years - with all of its big corporate customers.

"I can't think of a single customer where we're not getting price increases," he said.

Randy Smith, chief executive of Smith Travel Research, said the hotel industry "is now hitting on all cylinders."

He said it will take four or five years for the supply of hotel rooms to catch up with demand growth.