The Great Gas Gorge

The Great Gas Gorge

Will soaring gas prices really affect the upcoming travel season? These experts say there’s no way!

Tuesday, April 26, 2011

Tony Dela Cruz

Is the fuel tank half-empty or half-full? It’s a question most hotel operators would rather not have to answer this time of year as they ponder what increases in rate or occupancy, if any, await in the summer season.

Veterans say the lodging industry has been down this road before, knows what to do and is doing it, in terms of the types of seasonal promotions designed to prevent market share erosion. Both hotel owner/operators and franchisors seem mindful of the need to protect room rates that are just starting to recover from the hammering they took in 2009. And prognosticators are saying there’s even some pent-up demand that can push up revenue as the weather warms up.

And $4 a gallon for gas? Experts say that’s just a number, a mental hurdle at worst, that will not be a deal breaker for a family traveling by car who might pay an incremental $35 for the same trip had it been six months ago.

Derek Baum, director of operations for Orlando-based Rosen Hotels and Resorts, says RevPAR sensitivity related to energy costs “is not necessarily new news, we’ve been through this before,” pointing to conservation measures that have been in place for years. For example, they don’t heat swimming pools that can maintain 82 degrees on their own. At the same time, Rosen will tweak the energy budget if needed. Baum says the company just installed high-efficiency gas boilers for guest rooms and restaurants.

In terms of summer revenue, Baum sees “extremely competitive average room rates” trying to rise. He’s hoping third-party internet bookings can add to occupancy without putting too much downward pressure on room rates. “We try to combat that by offering price guarantees on our own website,” he said.
Protecting room rates is also the goal for Country Inns and Suites by Carlson, according to Aurora Toth, the brand’s vice president of marketing. “Our franchisees had a tough three year run, they are trying to get money back in the till, so we don’t want to discount our room rates,” she said.

Instead, the smart move is to value-add rather than cut rates. For the first quarter of 2011, Country Inns and Suites offered a 10,000 point bonus to its business travelers. “It seems basic, but it was the right focus at the right time,” Toth said.

To push leisure transient business, the brand’s current Spring Getaway promotion offers a $30 gift card, 3,000 loyalty points and a T.G.I. Fridays coupon in exchange for a two-night stay booked three days in advance, which she says are getting good bookings and good rates so far. Toth anticipates value-added strategies to keep sprouting for the balance of the year as rates and occupancy stabilize. “We don’t expect them to go back to 2007 levels but we do expect a good summer.

Within the narrow cast of mid-market limited-service, Toth says Country Inns is trying to differentiate with an improved breakfast offering, not necessarily bigger, but measurably different and better. This summer the brand is attempting to be the first in its segment to switch to non-disposable dinnerware. That means coaxing franchisees to add an industrial dishwasher; those who do it by June 1 will be rebated the cost of the new machinery. Toth said the concept was tested in a company-owned property and that it is an affordable upgrade that make sense. Another tweak: Carlson is asking Country Inns franchisees to rotate their breakfast buffet offerings daily so that repeat guests don’t experience deja vu in the morning.

The big picture for the industry going forward is typified by a well-worn phrase, “cautious optimism,” according to Bobby Bowers, senior vice president of operations, Smith Travel Research, Nashville. “What we were looking at, the end of last year for this year, was more growth on the rate side and continued growth on the occupancy side but not as much,” he said. “Most of the segments, if not all of them, were showing RevPAR growth based on rate.”

The rising cost of gas just as summer approaches is still not good and cannot be ignored, but Bowers says he doesn’t believe it will impact business because large brand owners like Choice, Wyndham and Intercontinental know how to “counter-promote” against those types of economic speed-bumps. “I don’t get a sense higher gas prices are going to create a huge barrier to travel during the summertime. (Choice, for one, has hedged that bet by offering some of its customers a $50 gas card for two separate spring bookings.)

Gauging a recovery in the middle of a recovery is always comes with caveats. “The one thing you can say for sure is our forecast will change,” Bowers said. “We’ll have to wait and see if there’s softness on the demand side.”

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