Higher fares could curb tourism | Company
Hotel room rates, driven by demand over the past year, could now hamper tourism amid rising inflation, state tourism officials said.
As the Visit Florida The travel marketing agency celebrated record first quarter numbers at a meeting last week in Orlando, Fla. Staff and board members also expressed concern that the increase the cost of hotel rooms is slowly affecting occupancy rates.
“I think we’re starting to see, in the last two weeks especially, that inflation is starting to catch up with us in most markets,” said Jacob Pewitt Yancey, director of Visit Florida Consumer Insight and Analytics.
“Now, overall room revenue is still up in all markets in the state as rate growth has been more than enough to overcome the declining level of demand,” Pewitt Yancey said. However, he added, “I think we are starting to enter a period where that may no longer be able to continue to be true.”
Hotel occupancy across the country slowed as expected after Memorial Day, according to STR, Inc., which provides data for the hospitality industry.
STR did not show any of the top 25 U.S. markets with occupancy increases during the May 29-June 4 period during the same period in 2019, prior to the COVID-19 pandemic.
The nationwide occupancy rate was 63.2%, down 12.1% from a similar period in 2019. At the same time, the average daily rate increased by 11.3%, to 147, $35, compared to the 2019 period. Despite this increase, revenue per available room decreased by 2.2%.
In STR’s weekly survey, Miami posted the highest average daily rate increase nationally, up 37.8% from 2019 to $209.55.
With an occupancy rate of 68.9%, Orlando was the closest national market, at 2.5%, to its pre-pandemic mark.
The figures also come as business travel remains far behind pre-pandemic totals.
Danny Gaekwad, outgoing chairman of the board of Visit Florida and owner of MGM Hotels, said hoteliers and other businesses need to adjust their rates.
The question is to find a balance with daily rates that maintain profits.
“We realized the profit taking when the ADR (the average daily rate) and the occupancy rate both increased,” Gaekwad said. “And now inflation and whatever other reasons, gas prices or whatever you want to say, we have to adjust fares or we’re going to have lower occupancy.”
Last month, when Governor Ron DeSantis announced a record 35.98 million visitors – mostly domestic travelers – between early January and late March, his office said Florida’s average daily rate had increased by more than 38% compared to the same period in 2021 and that the occupancy rate had increased by almost 24%.
These gains may not be matched in the second quarter of 2022.
For every 10% increase in room rates, demand drops 6% in Florida, Pewitt Yancey said.
Until the past two months, total demand for rooms in the state was above 2019 levels, and for many weeks it was above 2021 levels, he said. However, the demand was not evenly distributed.
“Until about a month ago what was happening was that the demand anywhere other than Orlando was just crazy, especially in Sarasota,” Pewitt Yancey said.
Orlando’s delay could have been attributed to business travel not returning to pre-pandemic levels, he said.
But over the past month, demand for rooms in Orlando has exceeded 2021 numbers; the rest of the state fell.
“Every market in the state, in terms of room demand, is down. But Orlando is now so up from where it was that it’s keeping the numbers positive statewide,” Pewitt Yancey said.
The decline outside Orlando is not just short of the tourism resurgence in 2021. Pewitt Yancey said it is “beginning to fall below 2019 levels in about a third of Florida markets.”
Lino Maldonado, board member and president of BeHome 247 Technologies, said Airbnb operators that have been in high demand during the pandemic are trying to balance rates and occupancy to determine profitability.
“We are still north of the 2019 numbers, but I think the ADR will definitely go down,” he said.