Occupancy Climbing but Room Rates Slipping at Southeastern Destinations this Winter – Summer Finished Strong

Although Hurricanes Harvey and Irma are now mostly in the rearview mirror from a destination tourism perspective, some degree of negative public perception seems to be lingering in their aftermath as seen in the most recent aggregated data released by Inntopia in their monthly DestiMetrics Market Briefing. As of Oct. 31, the Average Daily Rate (ADR) for the next six months for November through April has dipped 4.1 percent for the period compared to last year as properties adjust rates to entice visitors in the wake of ongoing post-hurricane media reports. However, occupancy for the next six months is up 11.4 percent compared to the same time last year with increases in four of the six months — November is up 9.3 percent and February is up a robust 20 percent. The surge in occupancy is offsetting the lower rates and delivering a 6.8 percent increase in aggregated revenues for the next six months compared to the same time last year.

“While stories around Hurricane Maria’s ongoing havoc on Puerto Rico’s infrastructure and services don’t necessarily have a direct impact on southeastern destinations, they do keep an unappealing storyline in front of consumers,” observed Tom Foley, vice president of Business Intelligence for Inntopia. “We’re a little concerned that the negative images from September’s storm coverage are lingering with prospective visitors, which in turn is pushing properties to offer lower room rates than last year. However, the strategy of using lower rates to encourage visits has been very effective following previous weather events and is working again this year as reflected in the occupancy upswing for the winter season,” he continued.

Despite the upheaval created by the storms, October finished on a positive note. As of Oct. 31, aggregated actual occupancy for the month of October in seven resort destinations in four states was up 4.8 percent and helped deliver an 11.5 percent gain in revenues. For the full summer encompassing May through October, aggregated occupancy was down a scant 0.1 percent while revenues were up a modest 1.8 percent in a year-over-year comparison to the same time last year.

The Briefing also confirms that there is a significant gap between historical occupancy figures and daily rates for summer and winter in many Southeast destinations.

“We know that many Southeast destinations reach their peak performance of the calendar year during the summer so what we might be seeing is that maximum practical occupancy is being reached—particularly on weekends and during special events,” said Foley. “So capacity levels and market forces may be pushing down on occupancy figures and in turn, adding upward pressure to daily rates in a classic supply and demand scenario,” he added.

Key economic indicators during October are also playing a role in the healthy revenue performance compared to last year. Following a stormy September, economic indicators rebounded in October with the September job creation report being revised from a loss of 33,000 jobs to a gain of 18,000. Along with the 261,000 new jobs created in October, the Unemployment Rate declined from 4.2 to 4.1 percent. However, prospective workers dropping out of the job search was also cited as an explanation for the dip. On Wall Street, the Dow Jones Industrial Average jumped another 4.3 percent in October, setting another all-time record for the Index and finishing a hearty 28.9 percent higher than it was one year ago. These positive figures were reflected in the Consumer Confidence Index (CCI) that rose 4.4 percent to reach its highest benchmark since December 2000 at 125.9 points.

“We are monitoring a measurable and significant shift in booking patterns that emerged in 2017 and is continuing into 2018 that clearly shows an industry with a strong consumer base—despite fluctuations in rate,” explained Foley. “These destination visitors are booking lodging at reduced rates at a brisk pace supported by this optimistic economic environment. The slightly lower rates should help bolster the already strong occupancy gains for this winter and as availability gets tighter, rates are likely to creep up and strengthen revenues and yield for these participating properties.”

Each month, DestiMetrics delivers forward-looking reservation activity information to participating properties and organizations with individualized reports and aggregated averages for lodging properties, destination marketing organizations, and local chambers of commerce. Information in the Monthly Market Briefing is designed to assist with budgeting, staffing, and marketing for participating destinations based on reservation activity for one to six months in advance.