Summer Lodging Numbers Don't Look Good

By Desiree Parker Thursday, September 29, 2011

The summer season was pretty poor for Triangle tourism based on hotel industry data.

Based on numbers provided by industry analysts from Smith Travel Research, June hotel occupancy in the Triangle was 53.2 percent, down 4.4 percent over 2010. The revenue per available room (RevPAR), a key metric for the industry, was down 14.1 percent. In July, occupancy was 63.1 percent, down 12 percent over last year while RevPAR was down 9.5 percent. In August, occupancy was 59 percent, down 11.7 percent. RevPAR was down 11.9 percent.

The summer months are the most important of the year for businesses that rely on tourism in the Triangle. Hoteliers have long said their target for acceptable occupancy over a year is about 58 percent; the average occupancy so far this year through August is 42.2 percent.

Regarding the Smith Travel data, Hotel Motel Association President Billy Scruggs says the still-depressed economy likely was a big factor in the low occupancy numbers. “Consumer confidence is still down,” Scruggs says. “This makes us most anxious, especially when we see destinations similar to us not in similar territory. Virginia Beach continues to do well.”

Greater Williamsburg Chamber and Tourism Alliance Vice President for Tourism Bob Harris agrees that low consumer confidence is affecting visitation to the Triangle. “In July and August, consumer confidence tanked,” Harris says, citing the Consumer Confidence Index, which sank from 59.2 in July to 44.5 in August, its lowest level in more than two years. “We want 90 to 95 percent consumer confidence levels,” he says. “That’s when we see our spikes [in visitation].”

As for Virginia Beach consistently outperforming the Williamsburg area, Harris says this is because Virginia Beach has a strong corporate travel market, as opposed to Williamsburg, “which is dependent on leisure travel business.”

Harris points to Branson, Mo., and Pigeon Forge, Tenn., as comparable markets that rely mainly on leisure business, and both are also struggling, he says.

As for whether the hotel industry has come to a breaking point yet after years of low occupancy, Scruggs says he doubts developers will want to come in and build new properties now. “Hotels won’t get built unless there is occupancy in the upper 60s or upper 70s.” So far this year, occupancy in Williamsburg is at 42.2 percent. Occupancy rates started dropping off after 9/11 and never really recovered, he feels.

Scruggs says he is aware of “a number” of hotels that are underwater and are now owned and operated by note-holding banks.

Williamsburg was up 4.27 percent in room tax revenue in June compared to 2010, and July showed a decline of less than one percent, seemingly at odds with Smith Travel data. Williamsburg City Manager Jack Tuttle suggests that the increase in city room revenue collections in June likely means Colonial Williamsburg hotel properties fared well in that month, and also in July. CW has just over 900 rooms available, and does not share its information with Smith Travel.

The city room revenues still aren’t up to 2008 and 2009 levels, though. According to Tuttle, the city had the “first wave of hotel product” built in the area, some properties dating from the 1950s and 1960s. These properties “don’t meet today’s travel standards... The market has changed, and now there’s too much product [in the city] that doesn’t fit the [market’s] needs.” For instance, many school groups visiting cannot have outside room access (versus inside hallway access) due to safety standards, which eliminates many older hotels, Tuttle explains.

The city is working on redeveloping areas with these older hotels, he says, but redevelopment takes time and funding.

All the experts WYDaily spoke with agree that Hurricane Irene (which hit in late August) was bad for the tourism industry, even though local government revenue data isn’t available for that month yet. The storm caused long-term power outages in the area, and also affected the ability for others to travel outside storm-ravaged locales.

“We knew we’d take a hit from Irene,” says Scruggs, “not just over that weekend but residually. We lost people who wanted to travel after the storm and didn’t, or couldn’t. Hoteliers already felt August was a little soft to start with.”