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Lodging Market Turnaround Actually Starting To Make Quicker Spin

Friday May 28th, 2010 - 11:44AM


Jay Schultz, sr. vp, hospitality group, Hotel Business

 Within the past year-and-a-half or so, I’ve made literally dozens of presentations assessing market conditions for HOTEL BUSINESS® advertisers and readers. While the sessions included personal opinions supported by published data and research, the news passed along was rarely, if ever, positive. 

When it came time for questions, the first one would inevitably be, “When do you think the hotel industry will turn around?” My responses ranged from “well into the fourth quarter of 2010” to “the first quarter of 2011,” and anywhere in between.

That was until a few weeks ago when I was asked to present the Industry Update at the Hatchett Hospitality annual sales meeting. For those not familiar with the company, Hatchett Hospitality is a purchasing, interior design and installation company based in Memphis, TN. During this presentation I was finally able to pass along some positive news. I relayed the data just released by Smith Travel Research predicting that the U.S. hotel industry would end 2010 with a stronger performance than previously forecast in all three key measurements: occupancy, RevPAR and ADR.

Reinforcing STR’s revised predictions were the results of American Express’ third annual CFO Research Global Business and Spending Monitor. The research revealed that business travel spending is stabilizing and policies are beginning to loosen, particularly in areas that can be closely linked to revenue growth.

The report indicated a majority of finance executives worldwide, 57%, plan to maintain or increase their business travel spend compared with last year, with 26% planning to increase spending and 31% planning to maintain spending.

At the same time, according to the report, spending policies are being relaxed as companies seek to get their staffs on the road to help grow their businesses. For example, more than a quarter of respondents, 27%, plan to loosen spending policies for travel that involves meeting new clients or business development. 

Now for a little dose of reality. Although most indicators point toward better times for the industry, one must not be blinded by the onslaught of positive news being reported. There are still a plethora of negative issues facing our industry. There are many who feel that the fundamental problems associated with commercial real estate have yet to hit the crisis point and will not until all CMBS loans come due. 

Nevertheless, a number of the experts I have spoken to maintain that many of the issues coming down the pike can in fact be addressed provided the industry sees the turnaround that has been predicted. My hunch is that positive cash flow and increased profits, along with the business acumen of some pretty smart executives, will lead to a successful turnaround.