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Area Hotel Occupancy Rates Decline

Greg Bordonaro

August 31, 2009

Occupancy rates for Greater Hartford hotels continue to lag and there are mixed feelings about when a turnaround might occur for the state’s hospitality industry.

While some experts say there could be an increase in demand during the last part of the year, others say the future looks cloudy. And Connecticut’s budget woes could play a role in the industry’s recovery as threats to culture and tourism spending could hinder the state’s ability to attract visitors.

On average, Greater Hartford hotels filled up about 49.1 percent of their available rooms from January through July of this year, a 15 percent decrease from the same time period last year. Occupancy rates crept up above 50 percent during the months of May, June and July, but still paced well behind last year’s totals.

At the same time, Greater Hartford hotels brought in about $46 per available room, almost a 20-percent drop from the year ago period, according to data provided by Smith Travel Research.

The area surveyed includes more than 30 communities stretching from Clinton on the shoreline through central Connecticut, the Farmington Valley and the Hartford metro area.

Meanwhile, occupancy rates for all Connecticut hotels dropped 14 percent during the first seven months of 2009, to 51 percent and revenue per available room dipped almost 20 percent to $51.

Jeff Higley, of Tennessee-based Smith Travel Research, said the region’s occupancy rates are lagging behind the national average, which is currently at 56 percent.

Higley said the recession and economy are playing a big role in the poor numbers as group and corporate business, such as meetings and conventions as well as transient and leisure business have all declined. Higley said the first thing businesses look to cut in tough times is discretionary travel, and financial services companies, which Hartford has a lot of, have led the way in those reductions.

“Those institutions were regular travelers, but people just don’t feel comfortable doing it right now,” Higley said.

As a result, revenue for Connecticut hotels fell 17 percent to $396 million from $480 million a year earlier, Smith Travel research data said.

Revenue for Hartford hotels fell 19 percent in the first seven months of 2009 to $123 million.

Chuck Moran, president of the Connecticut Lodging Association and general manager of the Courtyard by Marriott Cromwell, said hotels have responded to tough times by cutting expenses and downsizing their workforce. He said the decline in occupancy is also hurting the food and beverage side of their businesses as well.

“Labor is No. 1 expense to control,” Moran said. “Some properties have taken a hard hit with layoffs and cutbacks. We are really hoping to see a turnaround, but I don’t know of anyone looking to add staff anytime soon.”

The poor numbers for the industry aren’t a surprise to most people, but the outlook going forward remains unclear.

PKF Hospitality Research, a national consulting firm specializing in the lodging industry, is forecasting that hotels in the Hartford area will see a slight increase in demand starting in the fourth quarter of 2009.

That would be the first quarterly increase in the number of hotel guests since the second quarter of 2008.

At the same time, the firm forecasts occupancy rates to start growing again in 2010, while rates are not expected to begin increasing again until 2011.

Reed Woodworth, of the Boston office of PKF Consulting, said Hartford is slated to do much better than the nation in terms of change, largely because how far below the region is in overall performance.

“The markets that were growing the most over the past three years are seeing the steepest declines,” Woodworth said. “Hartford did not see much growth over this period.”

Moran said he doesn’t envision an increase in demand in the fourth quarter and the property that he manages is forecasting to be down 16 percent in occupancy during that time period.

“I don’t see that demand increasing,” said Moran. “The future still remains very difficult to identify.”

Ginny Kozlowski, executive director of the Connecticut Lodging Association, said a lot of the recovery might depend on the state’s budget situation. She said if tourism spending and marketing is significantly reduced, the state will have a hard time attracting people, which will hurt the hotel industry.

She said currently there will not be a fall media or advertising campaign from the state, which especially hurts Connecticut because its fall foliage season is one of the best times to attract tourists.

In addition, under Gov. M. Jodi Rell’s latest budget proposal, she severely cuts funding to the state’s five regional tourism districts to about $180,000, from $855,000. Democrats are proposing to reduce spending for regional tourism districts to $360,000, Kozlowski said.

“In the long term, if statewide marketing cuts are going to be made, it will hurt the recovery of the hotel industry,” Kozlowski said. Kozlowski also noted that the hotel industry brought in $89 million in occupancy taxes to the state coffers in fiscal year 2008 and that tourism employs 110,000 people.

“The impact is far and wide and the impact is across the state,” she said.

Some major events occurring in downtown Hartford later this year include a stitching convention that is expected to draw 5,000 people. There will also be a regional cheer competition and the Revolve Tour at the XL Center, which is a “Women of Faith” event geared toward teens.

Reprinted with permission of the Hartford Business Journal. To view other stories on this topic, search the Hartford Business Journal Archives at http://www.hartfordbusiness.com/archives.php.
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