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You Think Airlines Have It Bad? The Hotel Industry Is Worse…

For whatever reason, the airline industry’s woes have gotten lots and lots of media attention, but when it comes to facing down a gigantic mess, the hotel industry has it far worse right now.  How bad?  Hotel occupancy for the first week in November dropped more than 14 points versus last year to a very, very bad 56.9%.  We’re talking post-9/11 bad.  Other stats?  Revenue per available room (so-called RevPAR) in the luxury segment is down 23% year over year during the first week in November.  Average daily rates (ADRs) in Vegas were down 21% in September versus last year.

With travelers typically booking 45 or so days out, hotels are just now feeling the effects of September’s terrible financial news.  Unlike airlines, hotels can’t easily take capacity out of the market (short of shutting down hotels entirely, a move that some chains are taking with their lesser-performing hotels, or taking this opportunity to renovate).

On the plus side, travelers will be happy with the cheaper hotel rates and, especially in the upper and luxury segments, packages with extras that are available during the coming months.

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  1. That’s amazing demand destruction. So far, it would appear that airline demand is down MUCH more modestly. CO posts its numbers on its webpage, and load factor is down 4% over last November’s total, but the busy Thanksgiving period hasn’t started yet.

    I’d love to know what airline bookings look like here.

  2. We saw from that story yesterday that travel agents are reporting a huge dropoff in airline demand in October, which will show up in miserable Dec/Jan numbers.

  3. Why can’t hotels easily reduce demand? Taking two floors out would seem to be very small cost. Granted, you’ve got a cost of capital to deal with, but the human factors are minimal (maids only clean in once a week instead of every day)

  4. I actually think December RASM numbers will look pretty good because of the “seat shortage” around X-mas.

    I think non-holiday periods will take a hit, though, until the stock market calms down a bit. My theory is that both business and consumers are a little panicky here. Once the stock market levels off somewhere, people will be more willing to travel.

    It’s a theory, anyway. :)

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