Go get a room? Chicago hotels say more people are
A couple days ago, I wrote about how it seemed that anecdotally, Chicago’s hotel industry is beginning to see signs of the economic recovery. Yesterday, we discussed how national quarterly numbers prove that trend across the country. Today, we finish the week with more positive numbers, this time about Chicago.
Smith Travel Research Inc. generously provided me with those same quarterly numbers, but specifically for the Chicago market, and it looks like we can safely say Chicago’s hotel industry is joining the nation and is hopping on the springtime bandwagon.
According to STR, the number of rooms sold rose 5.3 percent year-to-date March 2010. That number, essentially the demand for hotel rooms, is the number one metric STR uses at when trying to gauge where the hotel industry is trending. March alone saw an 8.5 percent increase in demand for rooms. Nationally, this is the fourth consecutive month of demand increases year-over-year. This signals to hotels that the uptick in demand isn’t a fluke. With tourism season beginning to kick into gear, we can expect demand to continue to rise.
Occupancy rate, different from demand in that it divides rooms sold by rooms available (so occupancy rate could decrease even as demand increased if the supply of rooms went up), also went up for the Chicago market. The average occupancy rate was 47.6 percent for the first quarter, which sounds low, until you compare it with the 45.5 percent hotels saw for the same period last year. That’s a 4.5 percent increase, better than the national average increase of 2.3 percent.
Where Chicago underperforms is in the average daily rate and revenue per available rooms. Better known as ADR and RevPAR respectively, the two metrics, combined with occupancy rate, are the key performance indicators monitored by the hotel industry. For Chicago hotels, ADR fell 10.3 percent to $93.04 for the first quarter, while RevPAR slid 6.3 percent to $44.27. Nationally, both numbers fell as well, but not by as much: ADR by 4.3 percent to $96.27 and RevPAR by 2.1 percent to $50.01.
The mixed performance indicates a significant, but very unstable recovery for the Chicago hotel industry. Despite outperforming the nation in occupancy rate, Chicago hotels lost more in terms of revenue because of its lower average daily rates.
Those rates will be the metric to watch in the coming months. As Jeff Higley, editorial director at HotelNewsNow.com (STR’s news division) told me, once we start to see rates increase, that’s when we know there’s a true and solid recovery coming for the hotel industry.
But as he also said, in order for hotels to do that, demand needs to continue to increase first, and these numbers are the proof that such a trend is occurring, even right here in Chicago.
