After several recession-induced years of being a drag on the hotel industry, group travel is set to be a top performer in 2012, TravelClick executive Tim Hart told attendees of the Hunter Hotel Investment Conference this week. Hart said both bookings and daily prices should climb about 5 percent. That bodes well for Gaylord Entertainment's portfolio, which saw Q4 group nights fall 5 percent late last year.
Hotel owners have entered 2012 with decent momentum when it comes to demand — both from groups and leisure travelers — and pricing power. The hospitality team at PricewaterhouseCoopers now expects U.S. revenue per available room to rise 6.5 percent this year, helping the industry to get within a whisker of its pre-recession highs. But that decent growth number comes with some caveats: Occupancy will rise only 1.3 percent this year, says PwC, and "the outsized gains experienced during this resumption of travel activity have largely run their course." (See the chart below.)
Translation: If you want your hotel to be able to hike prices and get on the right side of that 6.5 percent RevPAR number, you'll have to step up your game in 2012.
This holiday season is expected to be a good one for many hotel operators given its three-day weekends. But Julie Parodi of Pegasus Solutions says business travel is showing signs of growing nicely well into 2012's spring convention season.
TravelClick executive Tim Hart says the group travel business is looking very strong for early next year — Q1 bookings are up nearly 20 percent — and that operators should prep accordingly. “Despite your inclinations to not be confident based on everything that’s happening around you in the macro environment and the news environment, act on the numbers that these represent and go ahead and enter 2012 with confidence,” Hart told HotelNewsNow.com. That's the way Gaylord Entertainment execs, who report their Q3 profits next week, have been talking for a while.
The last few months of Smith Travel Research hotel demand data for the nation's largest markets shows a smooth peak and drop over 2010, which means things are likely to get bumpy for facility owners and managers. The good news: Rates are holding up so far and operators are being smart about adding new rooms to the market.
Hotel giant Marriott yesterday reported second-quarter profits in line with expectations but said its Q3 numbers will fall a bit short. That news has its shares down more than 8 percent today, but it also is putting pressure on peers Hyatt and Starwood and locally based Gaylord Entertainment — even though Goldman says Marriott shouldn't be seen as a bellwether.
Avondale Partners analyst Fred Lowrance hit the road for a bit recently with Gaylord Entertainment President David Kloeppel and came away thinking the Street is overreacting to the company's soft first-quarter numbers. (Many investors and analysts focused on lower-than-expected future bookings, which are mainly the result of the company's strategy to hold back as pricing continues to improve.) And while Lowrance says the second quarter will likely be only "okay," higher corporate travel spending is pushing up prices across the country and has Gaylord positioned to reap the rewards starting later this year.
[W]e are convinced that everything is playing out according to plan, with GET well-positioned to keep pace with the industry's RevPAR recovery longer-term and realize benefits from increasing high-margin transient occupancy.
Lowrance has a "market outperform" on Gaylord and sees the stock rising by more than 50 percent to $51. A more muted endorsement came earlier this week from BGB Securities, which lowered its price target on Gaylord shares (Ticker: GET) to $35 but said longer-term investors will do well with the company.
[C]onsidering the recent pick-up in hotel transaction activity and the prices being paid for these assets, we believe GET is more likely to grow through new development at this point in time. [...] We expect management will be disciplined in its approach to growth, with anticipated returns on any announced growth opportunity likely to greatly exceed GET's 12% unlevered, after tax minimum hurdle rate.
The move to a larger 737, the world’s most widely flown plane, would allow Southwest to increase capacity even as it holds its fleet size steady through 2012, waiting for business travel to pick up. The Dallas-based carrier is taking new aircraft only as replacements for older planes, not as additions to its single-aisle fleet, which numbered 544 at the end of June. Southwest said July 29 it had exercised options to buy 25 737-700s valued at $1.7 billion based on list prices. Deliveries start in 2011. If the carrier opts for the 737-800, it would replace some pending -700 orders with the larger planes and deliveries would be expected to start in 2012, Eichinger said. “The intent would be to use it on the high-demand, longer- haul routes within our current network,” she said. “We’d be able to add capacity in those cities where you see high demand but we aren’t necessarily able to get more space to add flights.”Southwest is the largest carrier at Nashville International Airport, handling 52 percent of all enplaned passengers.
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