Local Hotels Continue to Be Hit Hard

BOSTON-According to a new study put out by the Hospitality Research Group, the research affiliate of PKF Consulting, in conjunction with Torto Wheaton Research, this area’s hotel industry–which according to the study includes only the chain-affiliated hotel–will perform nearly two times as poorly as the average of the rest of the nation in terms of income received from the rental of rooms.

According to Petros Sivitanides, a senior economist at Torto Wheaton Research, “we expect Boston to do twice as worse” as the average of the rest of the nation. This area’s income received from the rental of guest rooms–referred to as RevPAR–decreased 10.4% in the second quarter of this year compared with the previous year’s second quarter. Nationally, the RevPAR decreased 5.1% in the second quarter of 2001 as compared with the previous year. Sivitanidas points out that most of the decline over the past year occurred in the full service segment, the higher quality hotels. The year’s decrease in that segment was 10.4% whereas the year’s decrease in RevPAR in the limited service, or lower quality hotel, segment was 1.9%. The nation’s saw a .2% decrease in RevPAR for the limited service segment, which, says Sivitanidas, means that that market essentially remained flat.

In both segments of the market occupancy rates were 8% lower this year than in the previous year with this year’s rates at the end of the second quarter at 73.5% versus last year’s 82.2%. Room rates in the full service segment of the industry here remained flat from the previous year–as they have across the country–notes Sivitanidas, but he emphasizes that he is anticipating that they will go down here.

For both segments of the market, the study anticipates that this area will continue to perform at worse than average with an anticipated RevPAR for the area for the end of 2001 indicating a 12.1% decrease over the previous year. It is anticipated that the nation will have an 8.9% decrease over the previous year. “The hotel market has a lot to do with the overall economic character of the area,” says Sivitanidas. “Boston is a national business center and less people will be coming if there is less business.” Sivitanides adds that the general fear of travel due to the recent terror attacks is going to continue to adversely affect the hotel industry here.

Sivitanides says that a continued decrease of 5.4% in the RevPAR of the full service market will be seen in 2002 but we “expect a strong rebound in 2003.” But the impact on the limited service market will initially be minimal with a 1% decline seen for 2001. By 2002, though the RevPAR decrease will be 10% in the limited service market. “It takes longer for limited service to get affected,” says Sivitanides. “The rates in the full service segment will drop and that will affect the limited service market.” The RevPAR will continue to decline for the limited service market through 2004 with room rates dropping then as well. Sivitanides also emphasizes that that segment’s market will not see a spectacular rebound but a slow recovery.

But Sivitanides explains that the cumulative decrease in RevPAR for the limited service market will be about 15% by 2004, which will still be lower than the shorter but more severe decrease of the RevPAR in the full service market. In that market the cumulative decrease in RevPAR for 2001 and 2002 will be 18%.