The Hotel Industry has witnessed a drastic decline in guests over the last couple of years. It is only now that their occupancy and revenue has started to rebound. Although hotel owners are not out of the clear yet as their properties remain deeply in debt “with billions of dollars of mortgages coming due in the coming years” and aren't expected to fully recover until 2013. Smith Travel Research recently showed that the US hotel occupancy rose 2 points in the past five months raising the average to 54.7%, but this number still falls short fiver percent of the previously recorded number in the first five months of 2008 of 59.4%. The hotel-industry analysis company PKF Consulting Inc. reasons that “US average rates and revpar will return to their recent peaks by 2013”, whereas occupancy is not expected to return to its normal rate until 2014. For some hotels, for example the Ritz-Carlton Chicago, this waiting time is to long and they are hoping for a stead-fast recovery of 10 percentage occupancy points. Most hotels are not generating enough cash to cover even the interest on their loans and they are turning to private investors and their own money to help cover payments.
Given our country's economic turmoil, I believe much of the hotel industry's drop in occupancy is due to people saving and spending their money on more vital things. Families, the hotel industry's biggest customers, are spending their money on their children's education and finding the cheapest way to go on a vacation, which does not include a pricey hotel. It is only now, as the economy is starting to pick up, people feel the flexibility to spend their earnings on things outside of essentials like food and shelter. I agree with the article that the occupancy and revenue levels will not fully return for three to fours, or until the economy is stable enough for people to have extra cash to spend.
http://online.wsj.com/article/SB10001424052748704123604575322840815295472.html?KEYWORDS=hotel+industry
Your article is very logical. It makes sense that the hotel industry has experienced a decline in the number of guests. Money has been tight because of the recession and I can personally say I have not stayed at pricey hotels while on vacation in the past two years. I think it is a great sign that US hotel occupancy rose by 2 points in the past five months. Even though the current percentage is less than the percentage two years ago, it is still an increase. I agree with your analysis of the article as well.
ReplyDeleteI agree with most of your opinion of the article. I question the legitimacy of the majority of people spending money on their children's education. Yes, people in general are being more fiscally responsible, but some are milking the lower-class and working class for what it is worth. For instance, when President Obama tried to stimulate the economy with the Recovery Act; he was probably not aware that some construction workers just sit around, while one guy does all the work. In a realistic setting, people would be spending their money on "the essentials" in every family. Although, I agree, that in about three to four years there will be a turn around in the economy across the middle class. Thus, allowing them to spend on leisure items more frequently, and stimulate the economy.
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