Western Hotels in U.S. Spotlight

Hotels in the West have fared better than those in other regions so far this year.

By: Lisa Jennings

Hotels in the West generally have fared better than those in other regions so far this year, but the lodging industry in two Western states Hawaii and Utah lead the nation with the most dramatic results.

At one end of the spectrum, there is Hawaii, where hotels showed the highest occupancy levels, average room rates, and revenue generated per room during the first three quarters of 2003, compared with the same period last year.

At the other end is Utah, which reported the biggest drop in those same performance markers over the previous year, according to statistics compiled by Smith Travel Research.

Across the country, however, analysts are predicting betterdays ahead for lodging in 2004, particularly in the latter half of the year, and that’s good news for the hotel industry, which has suffered from a post-Sept. 11 slump. And many hoteliers say they expect to see occupancy rates improve before the end of 2003.

Overall, hotels in nine of the 14 states in the West showed higher occupancy rates than the national average of 60.7 percent.

Still, all but four of the 14 Western states saw occupancy rates decline, and only five of the 14 reported an increase in revenue generated per room.

In Hawaii, year-to-date occupancy rates at the end of September averaged 73 percent, up 3.4 percent over the same period in 2002. Average room rates were also up 2.2 percent to $144.88, and revenue generated per room increased 5.7 percent to $105.74.

The upswing reflects a tradeoff in inbound visitors. While the state saw a dramatic drop in the number of tourists from Japan, there was an increase in the number of U.S. visitors from the mainland, said Murray Towill, president of the Hawaii Hotel & Lodging Association.

“We’ve had a better recovery on the occupancy side than on the room rate or revPAR (revenue per available room) side because we’ve seen some discounting that has helped drive business,” said Towill.

While room rates have increased slightly, he said, “We’re hoping the recovery we’ve seen this year can be sustained.”

Hawaii has enjoyed occupancy rate peaks in the 80 percent range, but that’s not likely to happen again, said Bruce Baltin, senior vice president of PKF Consulting in Los Angeles.

“There’s just too much competition now,” he said.

While 73 percent occupancy is a healthy occupancy rate for Hawaii, Baltin said room rates will remain “flexible,” with plenty of deals available on the Internet.

In Utah, hoteliers are holding the line on discounting, despite the fact it is the only state where declining numbers hit double digits. Statewide occupancy rates dropped 6.1 percent over the first three quarters of 2002, from 60.9 to 57.2 percent. Average room rates went down 13.7 percent to $72.95, and average revenue per room slid 19 percent to $41.75.

But the dramatic downturn is largely a result of the fact that Utah hosted the Winter Olympics in 2001-2002, which brought a huge influx of travelers to the region last year and boosted numbers overall, mostly in the first two quarters of 2002, said Mark White, vice president of sales and marketing for the Salt Lake Convention and Visitors Bureau.

Before the Olympics, Salt Lake City was a hot choice for conventions, and the meetings market remained strong through 2002.

“The last nine months of 2002 saw more conventions in Salt Lake than any other 12-month period,” said White, and those visitors tended to stay late visiting the rest of the state.

“All through 2002, we were riding high, watching what the rest of the nation was going through and wondering when it was going to hit us,” said White. “Now it has.”

From 1997, when Salt Lake City was selected to host the Olympics, through last year, hotel inventory increased an estimated 63 percent, said White. “That’s pretty dramatic growth, and the demand for travel to the region has not kept pace,” he said.

Room rates, while down from the highs from Olympic fever, have not hit deep discount levels.

“There’s a fear that if they start discounting, it’ll commoditize the product and it’ll take years to get back to where they need to be,” said White.

“Everybody’s business has been hurt a little,” said Robert O’Neill, director of sales and marketing for the Salt Lake City Marriott Downtown.

While hotels elsewhere were dealing with the “post 9/11 sinkhole,” said O’Neill, “we were No. 1 on all Marriott rankings for the Western region. But it was due to the Olympic bubble.”

But the 515-room hotel is still faring well compared with equivalent properties, and Marriott as a corporation is predicting about 3 percent growth in 2004, he said.

Still, hoteliers in Utah are optimistic. Early snow this ski season has boosted spirits, and some resorts opened early.

Elsewhere in the West, hotels in Nevada also reported strong results for the first three quarters.

And in Arizona, where occupancy increased 2 percent to 60.8 percent, the lodging market has also stayed strong, despite the fact that a number of large resorts opened in 2003.

“The market has absorbed them pretty well,” said Baltin.