Headlines – Week of May 30, 2010

June 7, 2010

The ‘Staycation’ Phenomenon(from Ypartnership/Harrison Group)

One of the consequences of the Great Recession was the emergence of a new form of leisure travel called a “staycation.”  In their 2010 Portrait of American Travelers the Ypartnership/Harrison Group suggests this phenomenon is growing.    

Specifically, fully one in four U.S. leisure travelers with an annual household income of more than $50,000 took at least one overnight leisure trip/vacation within a 50-mile drive radius of their home during the previous 12 months as an alternative to vacationing in a farther destination. This type of trip ranked higher among younger travelers than older travelers, yet equally evident across all households regardless of their annual household income. 

Staycations are more than a short-term trend brought about by the poor economy and appear to be real and represent a discernible shift in consumers’ leisure travel behavior. It is important to understand, however, that the typical leisure traveler takes an average of four trips annually, so one should not come to the conclusion that staycations have necessarily replaced all well-established patterns of leisure travel.  However, the implication for lodging marketers is clear; local and regional origin markets retain considerable potential for generating incremental room nights in the years ahead, and this potential is likely to remain robust through the duration of 2010 and well into 2011. 

Lodging Industry Forecast Shows Recovery in Sight (from PricewaterhouseCoopers) 

In the company’s updated U.S. lodging forecast, PricewaterhouseCoopers’ expects continued recovery of demand, with the ability to increase room rates returning in 2011, after two consecutive years of decline. The initial months of 2010 suggest that a sustainable recovery of lodging demand has begun. As businesses and consumers gain further confidence in the strength of economic recovery, discretionary spending is expected to continue to increase, contributing to progressive increases in lodging demand through the remainder of 2010, though the pace of recovery is expected to moderate. 

With lodging supply growth expected to lag demand growth for the first time since 2006, PWC expects hotel occupancy levels in 2010 to increase. Average daily rates (ADR) are not expected to increase until early next year, resulting in a moderate occupancy-driven increase in revenue per available room (RevPAR) in 2010, with a more substantial, rate-driven recovery in RevPAR expected in 2011. 

The PWC quarterly lodging forecast is based on an updated macroeconomic forecast from Macroeconomic Advisers, LLC (MA).  MA expects real gross domestic product (GDP) growth to be above its long term average, but below the typical growth expected after a deep recession. MA expects GDP to increase 3.5% in 2010, followed by a 3.9% increase in 2011. 

The current slowdown in hotel construction activity is a key element in the foundation for recovery in operating performance of existing hotels. The pace of new construction starts fell from 134,000 rooms in 2008, to 47,000 in 2009, and most recently to a pace equivalent to approximately 29,000 rooms (annualized) through the first quarter of 2010. 

This sets the context for progressively slower supply growth of 1.9% and 0.4% in 2010 and 2011, respectively. This constrained supply growth, combined with gradual recovery in lodging demand, is expected to result in increases in occupancy levels to 56.6% and 58.2% in 2010 and 2011, respectively. The industry has experienced a more pronounced rebound in transient demand. However, until group bookings pick up, realizing significant increases in room rates in many hotels and markets will be challenging. As a result, PricewaterhouseCoopers forecasts ADR levels to decrease a further 1.7% in 2010, before growth resumes with a 3.5% increase in 2011. 

 PricewaterhouseCoopers U.S. Lodging Forecast 2010 and 2011 

Click to enlarge




Sources: Smith Travel Research and PricewaterhouseCoopers

Posted by Scott R. Lodde


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