by Cheryl-Anne Sturken | December 01, 2004
Hotels closed out 2004 with their strongest performance since 2000, thanks in large part to an improved economy and a much-needed boost in business travel. With the upswing expected to continue in 2005, meeting planners should be prepared to face higher room rates and occupancy levels, say hoteliers.
    “The market is very powerful now,” said Dave Scypinski, senior vice president of industry relations for White Plains, N.Y.-based Starwood Hotels & Resorts Worldwide Inc. “Rates are skyrocketing because they can. It’s economics.”
    In October, the Washington, D.C.-based Travel Industry Association said business travel would increase by 3.6 percent in 2005, thanks to a strengthening economy.
    On the hotel side, Atlanta-based PKF Consulting predicted a 4.1 percent increase in average daily rates. And while most major meetings destinations have seen an improvement already, some cities are rebounding faster.
    “Washington, D.C., and New York are doing extremely well, as is Chicago,” said Fred Shea, vice president of sales for Chicago-based Hyatt Hotels Corp. “There will be pressure on planners to book earlier than they have in the last few years if they want preferred sites on certain dates.”
    According to Shea, associations are blocking rooms earlier, rather than waiting in hopes of a fire-sale rate. “We have final-decision bookings picking up steam for 2006 and 2007 as planners see the room rates going up,” Shea noted.
    Further impacting available occupancy is the lack of new build in cities such as Boston, where a convention center has opened but planners still are waiting for a supporting headquarters hotel.
    Planners long accustomed to leeway on cutoff dates for room blocks should prepare for stiffer rules, said Scypinski. “If planners have rooms they haven’t picked up, and we can sell them at a premium, we are going to cut off their pickup time and sell them,” he noted. “We couldn’t do that before because the demand wasn’t there. Well, the demand is back.”
    The silver lining: Attrition concerns are mitigated somewhat, because hotels can more easily resell unused rooms in a block, something that was almost impossible from 2001 to 2003.