Hoteliers heartened by increase in business travel
We're seeing a nice rebound,' executive says
Businesses are loosening the reins on corporate travel, providing an uptick to Maryland hoteliers eager for a strong summer season.
Marriott International of Bethesda saw corporate room nights at its brands in North America jump by 16 percent in the first quarter from a year ago.
"Business demand strengthened dramatically," CEO J.W. Marriott Jr. said in a statement. "While first quarter room rates were generally lower than last year, as occupancy levels continue to improve, we see higher room rates on the horizon."
Revenue per available room at Marriott's North American properties is expected to increase by 3 percent to 6 percent this year.
The optimism is seen at real estate investment trusts that focus on the lodging industry, too.
"The recovery in corporate travel appears to be under way, with healthy gains in demand demonstrated in the first four months of 2010," Jon Bortz, chairman, president and CEO of Bethesda hotel investment company Pebblebrook Hotel Trust, said in a recent conference call. "We're seeing a nice rebound in that business level to perhaps some more normalized levels of business travel based upon where the economy is."
But that can change rapidly, so company executives "continue to be cautious," Bortz said.
Pebblebrook, a relatively new REIT, agreed last week to buy an upscale full-service hotel in the Maryland-Washington market for $67.1 million, he said. The transaction is expected to close within 45 days.
In the third annual survey of CFOs released this week by American Express, 26 percent of respondents said their companies will increase business travel spending this year. In last year's survey, only 2 percent of respondents expected a jump in travel spending.
Only 35 percent said they planned to restrict travel to conferences this year, compared with 79 percent in 2009.
Hotel occupancy in Maryland rose by almost 3 percent in the first quarter from a year ago to 50.3 percent, according to market research company Smith Travel Research. But the average daily room rate dropped almost 10 percent, forcing revenue per available room to decline by 7 percent to $50.52. Maryland had slightly higher revenues per room than the national average, but a slightly lower occupancy rate.
Occupancy in hotels nationally is expected to increase 2.2 percent this summer from last year to 63.1 percent, while revenue should rise by 2.3 percent to $26.9 billion, according to Smith Travel. Last summer, occupancy dropped by 9.1 percent from 2008, while revenue declined by 15 percent to $26.3 billion. In Maryland, summer hotel occupancy saw a lower decline of 4.5 percent.
For the week ending May 1, hotel occupancy nationally increased 5.7 percent to 58.8 percent from the same week in 2009, while revenue per available room rose 4.2 percent to $57.62.
"While demand for hotels this summer will be brisk and will continue to provide positive recovery momentum, rate growth remains a concern," Brad Garner, a vice president at Smith Travel, said in a statement. "Conditioned and value conscious consumers will not be reaching as deep into their wallets as in previous summer seasons."
The U.S. Travel Association projects that domestic travel will increase by 2 percent this year, while international visits will rise by 3 percent.