What is in the near future for the Hotel Industry?

First, a look back at 2010: In December, 2009, major hospitality research firms were forecasting a continued, but very slight decline in hotel performance for 2010. Now that the year is over, we see that recovery in the hotel industry in 2010 was far superior to the original predictions:

2011 and 2012 Predictions from STR (Smith Travel Research): The U.S. hotel industry is projected to end 2011 with increases in all three key performance measurements, according to the latest updated forecast from STR.

Occupancy is expected to rise 1.8% to 58.5%, while ADR would gain 4.2% to US$102.21 and RevPAR is projected to rise 6.1% to US$59.78. Supply is expected to report slight growth in 2011 with a 0.7% increase, and demand is projected to increase 2.5%.

“The stronger hotel demand fundamentals the U.S. hotel industry experienced in 2010 will result in a quicker turnaround than we had expected,” says Mark Lomanno, CEO of STR. “While this strength resulted in rapidly recovering occupancies last year, we look for rebounding room rates to lead RevPAR growth in 2011 and 2012. While it may be the second half of 2011 before we begin to see rapidly accelerating room rates, by the time we get to 2012 we now expect room rate growth to rival the boom years of 2006 and 2007.”

STR also is projecting increases in all three key performance metrics during 2012. Occupancy is expected to rise 1.7% to 59.5%, ADR would increase 6.8% to US$109.16 and RevPAR is projected to end 2012 up 8.6% to US$64.93. Supply during 2012 is expected to end the year virtually flat, with a 0.5% increase, and demand is projected to rise 2.2%.

TripAdvisor Survey Results: Free Internet access at hotels is more common than perhaps many consumers realize. According to a survey of 1,000 U.S. hoteliers by TripAdvisor, a staggering 91% say they will offer in-room Internet access as a free amenity in 2011. Only 5% of respondents will charge for the amenity, while the remaining 4% have no plans to offer Internet access.

In the first of what the online travel review site says will be an annual survey, hoteliers say they expect average room rates will either hold steady (51%) or increase (45%) this year. Three in five U.S. hotel owners are planning interior renovations this year, and two in five will upgrade their properties’ exteriors.

Most owners appear to be embracing online consumer engagement, with 57% expecting to grow social media marketing budgets this year, and just 6% anticipate social media budget cuts. Meanwhile, virtually all owners surveyed—an astounding 99%—plan to respond to online guest reviews in 2011, with the majority saying they will respond to both positive and negative comments.

Mobile marketing is a growing trend as well. A quarter of respondents plan to launch programs for the first time to engage with travelers using mobile devices, and another 27% say they offered such programs last year and will continue to do so this year. Still, nearly half of U.S. hoteliers have no plans to offer programs to engage travelers using mobile devices in 2011.

In terms of marketing strategy, discounting continues to be the most commonly-employed tactic—61% of hoteliers plan to attract guests by putting rates on sale. Other popular tactics include offering special amenities (36%), offering bonus rewards points (29%), offering deals on nearby attractions (23%) and offering a free night’s stay with booking (16%).

O.J.’s take on this: First, let’s hope the positive predictions for 2011-2012 come true. All of these predictions and data are based on the entire US and are highly influenced by the numerous urban and suburban hotels. So what does this mean for smaller hotels and motels and those in tourist destination markets? Although the exact metrics may vary, they should still see a continued improvement over 2010 performance. Every lodging property I am working with, or heard from, reported improved business in 2010. Most of this improvement came from occupancy, not ADR, matching the national trend.

Hotel/Motel owners will face continued pressure to offer free internet, grow their social network presence, and manage Trip Advisor posts. Encouraging satisfied guests to post positive reviews on Trip Advisor remains the best management tactic. Does your hotel offer any reminder or incentive for guests to post reviews? Successful hotels have learned to take proactive steps to use Trip Advisor as a marketing tool.

O.J. Robinson of CenterPoint has provided valuation, consulting, and brokerage services to over 45 businesses in New Hampshire, Massachusetts, and Vermont. He has owned and operated businesses in New Hampshire and has the experience and expertise to assist with the sale or improvement of your business. oj@cpointadvisors.com