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Hotels still struggling but there are bright spots

Southern California is one of several areas where the lodging industry is showing signs of improvement. The occupancy rate nationwide drops to 59.8% and revenue per available room falls 12%.

October 21, 2009|Hugo Martin

While hotels across the country continue to struggle with slumping occupancy rates and sliding revenues, industry data released Tuesday show signs of improvement in several regions, including Southern California.

The hotel occupancy rate nationwide dropped 5.4 percentage points to 59.8% in the first week of October, compared with the same period last year, while revenue per available room fell 12% to $59.28, according to Smith Travel Research Global, an industry research firm. The numbers are the latest in a series of reports chronicling one of the worst slumps in decades for the hotel industry.

Although Tuesday's data show some improvements in a handful of cities, industry experts say the hotel industry will not begin to rebound until 2011 or 2012.

Hoteliers have been particularly hard hit by the decline in business travel, a direct result of spending cuts by recession-battered businesses. Because of the slump in occupancy rates and revenues, more than 300 hotels in California are in foreclosure or have defaulted on their loans as of Sept. 30.

Still, Tuesday's numbers represent the first sign of improvements in more than a year.

The report by Smith Travel Research shows a slight rebound in spending among leisure and convention travelers in Anaheim, Los Angeles, San Francisco, New York, New Orleans and Boston, among other cities.

The occupancy rate in Anaheim -- home to Disneyland and California Adventure Park -- jumped 2.3 percentage points to 63.4%, and the number of group bookings, such as conventions and trade shows, jumped 27.5% for the first two weeks of October, compared with the same period last year. The number of group bookings also jumped, by 18.1%, in Los Angeles for the week that ended Oct. 10.

Among the top 25 major markets in the country, only New Orleans reported increases in the three key hotel indicators: occupancy rates, average daily room rates and revenue per available room.

Steve Hood, a senior vice president at Smith Travel Research, said he hopes the improved numbers might suggest the start of a positive trend. As more people stay in hotels, owners may be able to eliminate the steep discounts that have kept room rates low through the recession, he said.

"When people see some good news, that may help to push the rates in the right direction," he said.

The hotel industry got another dose of good news Tuesday when a corporate travel managers national trade group released a report that forecast an increase in business travel next year.

Nearly 60% of the 180 travel managers who were surveyed by the National Business Travel Assn. said they expected to spend more on travel next year compared with this year. In contrast, 30% of the travel managers surveyed said they expected travel spending to remain flat next year.

"As the economic recovery begins taking hold in 2010, companies will take advantage of low travel costs to send employees on the road in greater volumes, thus fueling the recovery," Craig Banikowski, president of the association, said in a statement.


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