I imagine hotel company executives were popping champagne corks in July as three key performance metrics reported by Smith Travel Research finally revealed positive signs for the upscale, upper-upscale and luxury segments of the U.S. hotel industry. June data showed an increase in the average daily rate for the high-end U.S. hotel market price segments. Luxury was the most improved hotel market scale segment in 2010 with the average rate of a luxury hotel room up nearly five percent over the past year to $237. High-end market hotels also showed increases in guest occupancy and revenue per room for hoteliers.
Marriott reported optimistic second quarter financials in July with a prediction from CEO Arne Sorenson that corporate travel will drive higher room rates by year’s end. New York City is back to double digit room rate hikes with business and group travel leading the way. The 2007 hotelier optimism is reemerging. The future is bright for a hotel recovery.
Personally, I am thinking we are seeing solar flares. Even if New York is a hot sunspot on the road to hotel recovery, I am concerned for the leisure travelers who can’t afford rising room rates or new sunglasses.
Leisure Traveler Blues or “Dude, Where’s my vacation?”
There is evidence of a decline in the realistic travel aspirations of the leisure class–working Americans who simply want a travel vacation. Destination Analysts published a survey showing leisure travel demand weakening in July 2010 since their last survey in January. This period of time coincided with some of the most lucrative hotel loyalty promotions in years. Free night offers from multiple hotel chains, huge frequent flyer mile bonuses for hotel stays and improvements in elite member benefits provided leisure travelers with high value “pay now, travel later for free” hotel options in 2010.
The revelation of the Destination Analysts survey is leisure traveler optimism in January 2010 diminished significantly by July 2010 despite the second year of unprecedented loyalty opportunities for discount hotel travel. One in three travelers surveyed in January planned increased travel for 2010. By July, one in six travelers who planned increased travel last January had reassessed and downsized vacation travel. The survey in January 2010 showed one in seven travelers anticipated less travel this year. By July, one in five travelers predicted less travel in 2010.
Spending Less on Vacation
A similar trend of lower travel expectations was revealed in the survey when travelers were asked if they planned to spend more or less for vacations than in the previous year. Six months into 2010 there was a significant decline among American travelers saying they expected to spend more for vacations and an increase in travelers planning to spend less for 2010. The highest cited reasons for cutting back were personal finances and the high cost of air travel and gasoline. Looking for travel discounts was cited overwhelmingly as the most likely strategy for vacation travel.
The vacation potential for the working leisure class in America appears in decline as upscale hoteliers celebrate on the road to recovery based on the resurgence in business and group travel. Rising room rates may keep away millions of working Americans seeking to fulfill vacation dreams.
Third Party Purchases, Loyalty Trade Down or Stay Outside
The major third party online travel agencies of Travelocity and Expedia reported increased hotel room night bookings for the past few months, yet hotel room revenue per night decreased. Over this same time period the average airfare increased domestically and internationally. Priceline and Hotwire offer deep discounts for upscale hotel rooms but typically result in a hotel stay situated in the least desirable rooms of any particular hotel property and no loyalty benefits.
Trading down in hotel market segment is a viable strategy for a limited budget while maintaining hotel loyalty benefits. Industry data show the budget to midscale hotel segments are still in room rate decline despite the rises at the upper market levels. Best Western, Choice and Wyndham are focused on budget and economy hotel brands. Each has loyalty programs offering award nights or miles for points.
And what if the trend of hotel “staycations” in 2009 and 2010 is replaced by gas-fueled generators and glamorously outfitted tents for do-it-yourself “glamping” vacations? Not so outlandish a thought if the overall economic recovery doesn’t trickle downwards from corporate-fueled luxury market travelers to the masses.
Hotel loyalty programs need another round of economic stimulus to attract leisure vacationers like stays count double, free night offers and high value bonus points. Otherwise, I believe the Rolling Stones tune may become a travel theme song for 2011:
“I’ve got no expectations to pass through here again.”