At the start of the recession, lodging demand and ADR fell further and faster than anyone anticipated. A reversal of fortune is underway, as hotels are experiencing gains in demand and finally in ADR as well. Will these trends continue?
Based on Rubicon’s forward-looking reservation and group sales data, committed demand on the books for the next two quarters indicates that these positive trends will indeed continue into the beginning of 2011. Group demand, which led the way out of the downturn, continues to strengthen. The return of business travelers has also contributed to the improving lodging fundamentals, driving improvements in both occupancy and ADR. However, the leisure segment, which propped up occupancy during the downturn when rates were low and deals aplenty, is struggling. Leisure occupancy is down slightly, and ADR growth is negligible. This changing customer segment mix is affecting the distribution channel landscape.
Once a quarter, Rubicon’s North American Distribution Review takes a close look at distribution channel trends. During the recession, business demand dried up and leisure/discounted demand surged. As this happened, more and more travelers leveraged all distribution channels searching for the best deal. The leisure segment favored online channels, in particular the online travel agencies (OTAs), such as Expedia and Priceline. Brand.com continued to attract more and more customers, both leisure and business. But the channels favored by business customers, in particular the GDS and CRS (voice) channels, experienced declining share. Since the recession officially ended and business demand returned, that momentum has swung back to property direct bookings and GDS channels with double-digit room night gains of 11 percent and 13 percent, respectively, during the third quarter.
We recently looked at channel distribution performance by percentage of transient room nights for Q3 2010 for the top 25 markets in North America, along with the variance percentage to Q3 2009. Several of the largest U.S. hotel companies took part in this initiative and supplied data to Rubicon as part of its MarketVision Demand Position market reporting.
The progress made so far means that hotels are no longer in survival mode. They can now turn more of their focus to the fundamentals of demand generation and demand/revenue management, or in other words, back to the future.
Lloyd Biddle is strategic manager at Rubicon, www.therubicongroup.com.
