Industry focused on pricing power as it emerges from recession

PHOENIX—As the hotel industry emerges from "the worst recession we've ever seen," panelists at The Lodging Conference, which continues today at The Arizona Biltmore in Phoenix, were focused on how to increase room rates after dramatic slashing over the past year. Until hotel operators can gain back pricing power, the industry can’t expect a true recovery, panelists said.

"The past two weeks, the news has been good. We’re coming out of the worst recession we’ve ever seen. Are we out of the woods yet? Of course not,”  said Harry Javer, president of The Conference Bureau, during Tuesday's opening session.

See also: Lagging ADR still major obstacle to recovery

The unimproved national 9.5-percent unemployment rate—which ironically stands at the same level as it did during last year’s Lodging Conference—is still impeding recovery.

“Housing is still a problem; more than 1 million people lost their homes this summer," Javer said. "Manufacturing is slowing again. And while consumers are finally beginning to save again, we’d like to see them start spending some of their money.”

The good news? At the beginning of the second quarter, lodging saw a demand for rooms that led the industry to reforecast its former dour predictions.

Mark Woodworth, president of Colliers PKF Hospitality Research, said the first half of the year was surprisingly good, with occupancy rates beginning to recover.

“We are at the tail end of a period of foreclosures," he said.

Woodworth said that he sees room rates and profit margins starting to accelerate overall in 2011 and 2012. That said, Woodworth warned that the U.S. won’t see new hotel development until 2013-2014. 

Vail Brown, VP of global sales and marketing for Smith Travel Research, had some good news to share, most notably that room demand is indeed up. In July, the U.S. hotel industry sold more than 2 million room nights, the most ever for that month.

“That trend will continue through the end of the year,” she said.

The bad news? Rates are lagging.

“The discounting our industry started in 2009 has had an extreme negative effect on the hotel business, which lost an estimated $10 billion in revenue last year,” Brown said. For that reason, she does not see a true recovery occurring until “we can get our rates back up.”

Bruce Ford, SVP of business development for Lodging Econometrics, pointed out the significant decline in the hotel development pipeline will “help us sell rooms.” Additionally, there is equity coming off Wall Street from new companies that are being formed and those new companies are actively buying hotels.

“As long as Wall Street is funding transactions, we’ll see [hotel asset] prices continue to rise,” he said.