Pinnacle Advisory Group predicts that the “Big Six” hotels, which include the Fairmont Copley Plaza Hotel in Boston, will benefit from a 6 percent increase in 2004 group bookings.
Representatives from the hotel industry were told last week to hold on just a little longer – a bright spot might be right around the corner.
After repeated setbacks after the Sept. 11 attacks, including terrorist threats, SARS, a lagging economy and the drop-off of corporate travel, hotel business has taken a beating, and in some cases, the blows were fatal. But hotel owners don’t need to throw in the towel just yet – experts are predicting a turnaround next year.
The Pinnacle Advisory Group predicts that the occupancy rate in Greater Boston will rise from a low of 58 percent in 2002 to 71 percent next year. The average daily rate also will increase, from about $152 to $155.60 in 2004.
There’s also good news for the “Big Six” hotels in Boston, a group that includes the Westin Hotel and the Fairmont Copley Plaza Hotel. Next year, group bookings will be up 6 percent over 2003, according to Pinnacle.
The group also predicts that the slowdown of new developments, an improving economy, a stronger convention year and the stabilization of events in the Middle East will carry the hotel industry over the trough and into recovery.
“All indications are that the market should improve,” Mark Arrants, managing partner for Pinnacle, said at the Massachusetts Lodging Association’s “Outlook 2004” event last week.
More Developments
There’s also some good news on the development front, as the number of new hotel rooms is expected to drop off in 2004. Industry watchers say that the decreased supply will boost business for established hotels.
This year, new developments will add more than 900 rooms. Those include the Embassy Suites at Logan International Airport, the Residence Inn in Charlestown, the Hotel Marlowe in East Cambridge, the Hotel Commonwealth in Kenmore Square and the Courtyard Hotel in Back Bay, all of which are scheduled to open by the end of the year. Next year only 595 rooms will be added in Boston and Cambridge, including the Hotel Onyx at North Station, the Jurys Doyle in Back Bay, the Clarion in North Station and the Hampton Inn and Suites in Crosstown.
The hotel at the Boston Convention and Exhibition Center is not expected to open for at least a year or more after the convention center – currently under construction in South Boston – opens, and was therefore not included in the projections.
The drop in supply, along with an increase of conventions booked for next year, also helps create a rosier picture for the hotel industry. The largest, and most talked about, event planned is the Democratic National Convention next summer. But even discounting its effect on room bookings, the remaining 2004 citywide conventions – or events that fill more than 2,000 rooms on a peak night – will still be up by 10 percent. Pinnacle data shows that 2004 conventions will provide 160,000-room nights, or 118,000 when discounting the DNC.
John Murtha, vice president and general manager of the Royal Sonesta Hotel in Cambridge, said that the Outlook predictions are reasonable for 2004 and in line with what the hotel itself projected for next year.
“We believe the assessment that, in 2003 we hit the bottom, is probably true. We’re seeing an increase in business here already,” he said. “But we have no way of knowing if 2004 will be the first part of the recovery or just an uptick.”
Hotels, which depend largely on corporate business, fell victim to a depressed economy, which began early in 2001. Locally, the Massachusetts economy lags behind every other region with a job count that’s almost 1 percent lower than last year, said Yolanda Kodrzycki, an economist for the Federal Reserve Bank in Boston.
The reason, she said, is that Massachusetts is concentrated with financial management firms, high-tech companies and the computer industry – all core areas hit hard by the recession. The growth areas of education and health care weren’t enough to cover losses in other areas, and hotels suffered the consequences.
Hotel and lodging jobs nationally were equal to last year, but in Massachusetts the job count decreased by 7 percent, Kodrzycki said. The states that are doing well, such as New Hampshire, Vermont and Florida, focus on leisure travel, whereas Massachusetts is more dependent on corporate business.
But forecasters are saying that the second half of this year will begin the turnaround hotels need to recover. They site improvements in the stock market, consumer sentiment and a stabilization of oil prices as key ingredients to a brighter future.
“My bottom-line prediction, when we meet a year from now, is that the tide will be turning and you’ll see a better four quarters coming up,” Kodrzycki said at the Massachusetts Lodging Association event.
