The Bounce Back Begins

It looks like U.S. hotel companies can finally stop holding their breath. While first-quarter reports were downright positive, second-quarter numbers seem to have trumped all forecasts. In the past 10 days, Marriott International and Starwood Hotels & Resorts Worldwide released some impressive second-quarter 2010 earnings reports, which showed occupancies inching up, swelled by a sustained surge in business travelers, as well as group business making a strong comeback. Note to meeting planners: Beware of rising rates.

At Marriott, where second-quarter profit more than tripled, Arne Sorenson, president and chief operating officer, speaking at the company's earnings call, said, "In the first quarter, improvement in group business was largely related to better-than-expected attendance at association group meetings. In the second quarter, corporate group room nights finally turned up as well -- up nearly 10 percent for the quarter." That increased group demand means meeting planners can expect to see Marriott start to get aggressive on room rates. According to Sorenson, groups that booked in the second quarter for a stay in the second quarter, "paid 5 percent higher rates than similar business in the prior year."

Starwood was even more bullish on its ability to push rate upwards. Frits van Paasschen, chief executive officer, reported that because overall new leads for group business was up 20 percent year over year, rates for 2010 bookings across its eight brands were up 16 percent. "For the first time in two years, total group business on the books is in positive territory," he said, adding that most of it was currently being booked in a very short window of time, on average four to five months out because of pent-up demand. "The short window reflects meetings that have been tentatively planned and that are now becoming real, or a realization that there are group activities that need to take place," said van Paasschen.

While it might be tempting to attribute some of the optimism to the spinning of data, a recently released report by Smith Travel Research on the U.S. hotel industry's performance for the first half of the year had some positively encouraging numbers. Not only did average occupancy increase 4.4 percent for the first six months of this year over the same period last year, occupancy for the second quarter was up 6.2 percent compared to the same quarter last year. What's more, "Second-quarter room demand increased 8.7 percent, the industry's largest quarterly demand increase since STR began tracking performance in1987," said Bobby Bowers, senior vice president, adding that the average daily, primarily at the upper-end, was improving (even though industrywide, it actually fell a further 2 percent to $97.18).