YOUR GUIDE TO THE TWIN CITIES
American travelers in all categories are again hitting the road, and hotel owners have seen their revenue jump this summer.
In a summer that has seen nothing to generate much optimism in most commercial real estate sectors, the big exception has been hotels. Surging numbers of travelers have put a jingle in the pockets of lodging property owners who say every type of wayfarer -- from corporate to family to government -- has been back on the road this summer.
Across the country, hotel chains were reporting significantly improved second-quarter results in big cities and internationally. And in the Twin Cities and the Upper Midwest, a local expert says August results for the region are bordering on record increase territory.
Although the rates hotel owners can charge are still being held back by soft consumer spending and the weak jobs market, the U.S. economic growth during the first half, though subdued, nonetheless has resulted in a resurgence of demand from both business and leisure travelers, a research report by Marcus & Millichap indicated.
Some parts of the country, such as New York and Orange County, Calif., saw big spikes in demand for limited service hotel chain rooms in June, a category that includes such brands as La Quinta and Hampton Inn.
Demand for such moderately priced rooms increased in each of the country's top 25 markets. Nationwide, demand was projected to be up 6.8 percent in the June-August period -- improving occupancy from 61.9 percent last year to 66 percent this year, the report predicted.
The resurgence, it said, has been fueled both by the corporate sector, which has seen fatter bottom lines and thus is allowing more travel, and by vacationers, who are taking advantage of deep hotel discounts and special deals to load up the family and head off to tourist destinations.
The Twin Cities area is seeing a healthy benefit from the return of demand. The analysts' hotel property index, which considers such standard industry metrics as occupancy rate, revenue per available room (RevPAR) and average daily rate (ADR), pegged Minneapolis-St. Paul as the sixth-most-improved market in the country compared to the year-earlier quarter, trailing only New Orleans, Boston, New York, Chicago and Denver.
On the business travel side, upper-end hotels in corporate capitals like New York are seeing a booming business. Those establishments have seen nine percentage-point increases in occupancy over last year by some estimates, spurring Starwood Hotels and Resorts to proclaim "the business traveler is back."
The owner of the luxury Aloft and W brands said in August it will open six new hotels in New York City and is on track to open more than 80 hotels in markets around the world this year.
Other major hotel chains that cater to business travelers also are reporting much-improved numbers in the first half of this year. The biggest of them, Hyatt Hotels, reported second-quarter numbers that saw RevPAR at its limited-service North American hotels jump by 6.8 percent with occupancy increasing by 860 basis points.
And on the leisure side, figures from Choice Hotels -- which includes Comfort Inn, Comfort Suites, Quality, Sleep Inn, Clarion, Cambria Suites and other brands -- indicated positive domestic RevPAR for the first time since the second quarter of 2008.
Twin Cities-based hotel consultant Ted Leines confirmed that the upsurge is being felt by his clients, saying their increases in some cases have been significant, indeed.
"I'm hearing reports from some of them that they've seen their best Junes ever and August is shaping up to be just spectacular," he said. "Their June revenues were their best by 10 percent, their Julys were the best by 12 percent, and in some cases we're talking about August revenues that will be up 30 percent over last year."
For the year, Leines said some of his economy brand hotel clients will see revenues up 20 percent over a very difficult 2009.
"My question to each one of my clients is, 'What's driving this?' and it's not just one type of traveler," he added. "It's not just that the business sector is traveling more. It's everything. Corporate, leisure demand, military, government, they're all contributing. The owners don't care where it's coming from, they just see that their revenues are rebounding, in some cases, dramatically."
In the Twin Cities, Leines said, the jump in demand for downtown luxury accommodations that cater to high-end travel and the convention business doesn't seem as pronounced here as it is has been in the East Coast markets.
Downtown Minneapolis has come back a bit, he said. Such hotels concentrate much more on further-out bookings because of the long-range planning necessary for the conventions they cater to. Leines said there's been some drop-off in such bookings, indicating the upsurge may not be sustainable as the economy appears poised to head into a double-dip recession.
"It remains to be seen what all this translates into in the longer run," he said, "but there's no doubt that economy brand hotels are benefiting."
Don Jacobson is a St. Paul-based freelance writer.
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