There has been a recent trend in the hotel industry, where the monthly occupancy of hotels around the world has increased. Experts attribute an increase in the amount of business travel over the past year as a main reason. Since the beginning of the economic downturn, companies have been slashing costs in an effort to make more money, and travel expenses were generally one of the first things to go. However, companies are now realizing that especially in this economy, it is actually more effective to build personal relationships with their clients. And of course, the best way to do this is to meet with the customers face-to-face. This change in strategy has brought hotels to occupancy levels not reached in the last three years. “Nationwide, monthly occupancy averaged 61.4% through the first eight months of 2011, up 4.5% year over year, says Smith Travel Research” (Gose). However, this increase in demand has not resulted in higher prices; average room rates only grew 3.5% from year ago. Companies who want to increase their prices need to be careful, as they do not want to bring the up too much too quickly. David Loeb, a managing director on a hotel research team, states, "I think there's a little bit of reluctance to push rates too far for fear of a backlash. No one wants to create an excuse for companies to send fewer people to a meeting.”
There is more good news for companies in the hotel industry. Even with financial uncertainty and the Dow dropping, there has not been a decrease in hotel room bookings. In fact, the rates are slowly but surely increasing. “Hotel demand lags the general economy six to nine months. “’When things start to get iffy or uncertain, there’s usually not an immediate translation in a decline in hotel demand,’ said Joe Long, chief investment officer and executive VP of development for Kimpton Hotels & Restaurants” (Mayock). Analysis by Pegasus Solutions (which is a company that provides services to the hotel industry) has come to the same conclusion based on booking information from July 1-August 14. Although analysts do not know exactly how long this trend will continue, current data does not show any indication of it slowing.
I liked how you mentioned two main events occurring in the lodging industry, as travel definitely contributed to the increase in room occupancy as well as a realization to further improve public relations with customers. It is always important to maintain such relationships especially in a service sector where interaction is needed to keep up with consumer expectations and keep a steady demand and revenues. It was also a good step to mention the Dow and the financial uncertainties which would influence stakeholders and investors yet, had no effect on room occupancy in recent years.
ReplyDelete- Lila Al-Refai
It is interesting that business travel is up, even by a little, as companies are still laying people off and cutting back on spending. It is difficult to imagine what companies would have to say to individuals who are not investors why they cut 1,000 jobs even though they had 4.5% more customers. This goes to show the difficulty the media directors will have in shaping the image of this.
ReplyDelete-Domenick Cocchiara