Triangle Hotels Losing Money, But Not Always Guests

May 30th, 2009 by WY Daily Staff
Triangle Hotels Losing Money, But Not Always Guests

Water Country USA is among the favorite attractions for visitors to the Historic Triangle.

An analysis of lodging trends says Williamsburg-area hotels lost money this April over last – but not all of them are losing guests.

According to Smith Travel Research Global, a company that analyzes lodging industry trends around the world, Virginia’s April occupancy rate, or the percentage of rooms sold, was 61.2 percent. That’s slightly higher than the country’s average of 56.4 percent. Williamsburg came in at 50 percent, behind Virginia Beach, the Norfolk/Portsmouth area, and the Newport News/Hampton area.

Local hoteliers who met with WYDaily earlier in the month to discuss the dismal state of affairs for the Triangle hotel industry believe a 58 percent occupancy rate, on average, will mean a decent profit.

Williamsburg Hotel and Motel Association president Chris Canavos said the HMA has made 58 percent their goal. “The infrastructure was built to have this occupancy rate,” Canavos said.

In 2008, only three months saw an occupancy rate at or above this number, and those were the three months of summer. No months in 2009 have gotten near it so far.

STR breaks the numbers down further, grouping local hotels in low, middle, and upper tiers based on their rates. In April, the Williamsburg-area lower tier hotels (with average room rates at $40) had a 28 percent occupancy rate, down 13 percent over last year. Middle tier hotels (with an average rate of $60) were at 42 percent, the same as last year.

Upper tier hotels (with a rate of $102), though, had a 62 percent occupancy rate, up almost 6 percent from last year, and well above the HMA’s profitability goal.

WYDaily tried to contact a few of the upper tier hotels to get some insight as to why they were seeing significantly more guests, but no calls were returned.

STR Global doesn’t receive the information for all the hotels in the area – a number of the big name upper tier hotels like Colonial Williamsburg’s lodgings, the Hospitality House, and Great Wolf Lodge don’t share their information with STR. Neither do a few of the smaller hotels.

According to Ron Kirkland, general manager of the Patrick Henry Inn (with an average rate of $99), the slipping economy and fewer-than-expected tourists have caused the upper tier chains to lower their rates. “Visitors can trade up, and for just a few extra dollars they can get a better room,” says Kirkland. “To compete, we have to lower our price, and other hotels then lower their rates. There goes our profitability.”

STR also tracks revenue and the change in average room rates, and the numbers line up with Kirkland’s assessment.

Williamsburg’s lower-tier hotels reduced their rates by almost 6 percent over last year, and their profitability sank 18 percent. Middle tier locations reduced rates the same amount, and only lost 3 percent. Upper tier properties – the same ones with higher occupancy – dropped their rates the same amount as well, and still lost 4 percent in revenue versus April 2008.

Doug Pons, owner of the Quarter Path Inn (rated as a middle tier hotel), agrees with Kirkland about the trend in rate reductions.

“Much of this is a flat-out demand issue,” Pons says. “When demand is high and there are lots of tourists, we all fill up. It trickles down.”

According to Pons and some other vocal HMA members the Williamsburg Area Destination Marketing Committee, organized to help increase overnight stays in Williamsburg, is to blame for some of the problem.

“I get a sense that we market to a more affluent segment,” says Pons. He suggests that this might be why the upper tier hotels are getting higher numbers of guests. “Our ads are in Elite Traveler, Southern Living and other publications that don’t necessarily attract an economy traveler.”

Pons and other HMA members argue that WADMC also focuses its marketing campaign early in the season, and should continue to market year-round. “We need to chum the water all summer long, and bait our hooks to catch all sizes,” Pons says.

None of the other WADMC members have agreed with the HMA’s criticism, at least not at any of their contentious monthly meetings. They appear to consider the group’s marketing to be exactly on target and a good use of the millions of dollars invested.

The debate about the causes of the sinking occupancy and revenues continues as hoteliers wait to see what the tally for May will be.

Though the Memorial Day weekend was pretty good by most estimates, “May is generally just like April,” says Kirkland, who is not too optimistic.

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