You can expect to continue to see cheap discount hotel rooms and cheap vacation packages being offered for travel to smaller U.S. cities. Weak demand means that hotels in small markets will be unable to increase their rates prior to the summer of 2011.
Some of the findings included in Smith Travel Research data include:
Occupancy rates in small town hotels and near highways remained largely flat at 49 percent in the first half of 2010. On the other hand, large cities, such as Chicago, New York, and Washington saw their occupancy rates increase to 65 percent vs. 61 percent a year ago.
Hotel chains, including Marriott and Wyndham, have been experiencing better financial results for their hotels located in large cities.
Hotel rates in New York City have been increasing since March after experiencing a decline over the prior 18 months. New Yorks hotels ran a 79 percent occupancy rate vs. 56 percent for the total country.
New York City has a disproportionate impact on U.S. hotel performance. Its 514 hotels add up to just less than 2 percent of the total U.S. room supply, yet their revenue is responsible for almost 6 percent. Average U.S. hotel room rates in the first half of this year dropped by 2.7 percent when New York City hotels are not included vs. falling only 2 percent when they are included.
Experts reason that large cities are experiencing higher hotel occupancy rates because the financial services industry, often located in those cities, is doing better. Small cities where manufacturing and agriculture businesses are primarily located are not doing as well.
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