Convention Hotels: The Hosts of Group Business
By Robert Mandelbaum Director of Research Information Services, CBRE Hotels' Americas Research | September 01, 2013
The U.S. lodging industry is well into its fourth year of recovery from the great recession of 2009. One of the pleasant surprises of the current recovery has been the very strong return of lodging demand. From 2009 to 2012, Smith Travel Research (STR) reports that the total accommodated room nights at U.S. hotels has increased by 15.5 percent, the greatest three-year increase in demand observed in the past 25 years.
Most industry analysts agree that this surge in lodging demand has been led by business and leisure travelers. Lagging during the recovery has been the group demand segment. With conventions and conferences returning to the market at a slow pace, how has this impacted the performance of the large convention hotels that typically host these meetings?
To analyze the impact of lagging group demand on the performance of convention hotels, we studied a series of data extracted from PKF Hospitality Research, LLC's (PKF-HR) Trends® in the Hotel Industry database. Trends® is PKF-HR's annual survey of operating statements from thousands of hotels across the U.S. The data series analyzed comes from a same-store sample of 58 convention hotels that reported revenue, expense, and profit information each year from 2007 through 2012. The 58 properties average 1,007 rooms in size. To provide perspective, we compared the performance of the convention properties to the performance of all the hotels in the Trends® sample.
Rooms Revenue Down
The negative impact caused by the lagging recovery of group demand becomes evident when analyzing the decline of rooms revenue (RevPAR) at convention hotels. From the pre-recession peak of 2008 through 2012, RevPAR at the sample of convention hotels declined by 6.6 percent. Concurrently, the decline in RevPAR for all hotels in the Trends® sample was only 2.6 percent.
RevPAR is driven by two components; occupancy and average daily rate (ADR). From 2008 to 2012, occupancy levels at convention hotels dropped from 73.4 percent to 73.2 percent. Since we are analyzing a same-store sample, this implies that convention hotels accommodated just 0.3 percent fewer rooms in 2012 than they did in 2008.
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