Cancun convention & visitors bureau trends and Economy Report – September 2009

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Stabilized Downtrend for Global Hotel Industry through First Half
STR Global data shows that global hotel performance results continue to fall sharply, albeit at stabilized levels. Aggravating the situation, an influx of new supply is generating additional pressures on industry fundamentals. In the first six months of 2009, hotel industry demand throughout the world decreased 9.0%, room revenue fell 24.0%, occupancy declined 11.5%, and average daily rate dropped 15.9%.

Results by Global Region
All four major regions shown below posted performance declines in the first half. The Asia-Pacific region posted the biggest occupancy drop (14.4%). Supply levels grew more briskly than anticipated with the Middle East/Africa zone generating the highest growth rate (4.6%). Europe had the sharpest slides in room rate (23.8%) and revPAR (31.3%).

% Change Year-on-Year in Hotel Performance Measurements by Global Region: January-June 2009
Measurement	Americas	Asia-Pacific	Europe	Middle East/Africa
Occupancy	-10.9%	-14.4%	-9.8%	-12.2%
Supply	2.9%	3.4%	1.3%	4.6%
Room Rate ($)	-9.5%	-17.8%	-23.8%	-3.0%
RevPAR ($)	-19.4%	-29.7%	-31.3%	-14.8%

Source: Hotel News Now – 8/13/09

Despite Declines, High-End Paris Hotels Remain Robust
Despite declines, the upscale and luxury segment of the hotel industry in Paris remains relatively strong. STR Global data show that although the occupancy level fell 12 percentage points in the first five months of this year, it remained at a solid 65%. Despite drops of 15.5% in room rate and 29.4% in revPAR, the city maintained stable levels of €414 in room rate and €267 in revPAR. Notably, the above comparisons are with the first five months of 2008 in which revPAR rose 21%; forthcoming comparisons with the second half of 2008 (when performance levels declined) are bound to show softer contractions. Additionally, decline levels in the first five months of 2009 already point to a softening trend.
Source: Hotel News Now – 8/11/09

Despite Pipeline Declines, Supply Growth Batters U.S. Hotels

U.S. Hotel Pipeline Continues Decline in July
The latest STR/TWR/Dodge Construction Pipeline Report shows that at the close of July 2009, the number of hotel rooms in the active U.S. hotel development pipeline declined 26.2% year-on-year to 487,831 rooms representing 4,554 projects. The number of total pipeline rooms in construction fell 29.0% to 141,957 or 29% of total pipeline rooms. (Notably, about 93% of projects that enter the construction phase continue to completion compared to a lesser percentage of projects in the planning phase.) All seven hotel segments reported double-digit decreases in pipeline room volume. Nevertheless, the supply of existing hotel rooms in the U.S. rose 3.2% to 4,772,377:

U.S. Hotel Supply Statistics as of July 2009
Category	Rooms	% Change (year-on-year)
Total Active Pipeline	487,831	-26.2%
In Construction	141,957	-29.0%
Existing Supply	4,772,377	3.2%

Source: Hotel News Now Report on U.S. Pipeline Declines – 8/11/09

Sustained Supply Growth Impacts Occupancy and RevPAR for U.S. Hotels
In spite of the pipeline contractions as illustrated above, sustained growth in the overall supply level is merging with lowering demand to undermine occupancy and revPAR levels for U.S. hotels. STR forecasts a 3.0% rise in supply for 2009 which is actually higher than the 2.6% rise in 2008. By comparison, demand fell 2.6% in 2008 and is projected to slide 5.5% in 2009. A brighter picture is envisioned for 2010 with supply growth expected to be up only 1.4% and demand up 1.1%.
Source: Hotel News Now Report on Sustained Supply Growth in U.S. – 8/11/09
Source: Hotel News Now Forecast for Supply Growth – 8/14/09

A Fourth Survey Show Hotel Satisfaction Levels Remain Robust
Recently, three independent studies revealed that, despite recession-driven cutbacks in operating expenses and staff sizes by hotel properties, satisfaction levels remained high among hotel guests (Travel + Leisure Atlas 08.05.09). A fourth study, Hotel.Info Value for Money Index, showed similar findings.

Hotel.info Value for Money Index
According to the hotel.info Value for Money Index, the satisfaction levels of guests with hotel performance worldwide have risen. The mean value of all customer ratings for bookings in the largest 20 cities around the world improved from 6.69 points at the end of 2008 to 7.11 points (out of 10 possible points) at the end of the first half of 2009. This global survey features guest satisfaction rankings for hotel markets throughout the world (see the article linked below for details).
Source: Hotel News Resource – 8/13/09

STR Issues Slightly Revised Forecast for U.S. Hotel Industry
Smith Travel Research has issued a minimally revised forecast. For 2010, the new forecast calls for a fractionally higher occupancy decline (0.6% rather than 0.3%) and a slightly higher revPAR drop (4.0% rather than 3.7%):

Smith Travel Research's Revised Forecasts for the U.S. Hotel Industry
Measurement	Full-Year 2009	Full-Year 2010
Occupancy	-8.4%	-0.6%
Room Rate	-9.7%	-3.4%
RevPAR	-17.1%	-4.0%
Supply	3.0%	1.4%
Demand	-5.5%	1.1%

Source: Hotel News Now – 8/13/09
Related Articles:
“PKF Projects Demand Decline to End in Second Quarter 2010” – Hotel News Now – 8/13/09
“Hotel Data Conference Attendees Predict RevPAR Recovery in Mid 2010” – Hotel News Now – 8/6/09
“Hotel Data Analysts Make Predictions for Recovery” – Hotel News Now – 8/13/09

Tourism Industry:
Survey Shows More U.S. Adults Intend to Travel in 2009
The number of adults in the U.S. who intend to travel during the remainder of this year has risen moderately, according to the July 2009 travelhorizons™ survey, co-authored quarterly by Ypartnership and the U.S. Travel Association. Compared to the results in the July 2008 survey …

• The percentage of all adults in the U.S. who plan to take one or more leisure trips rose two points to 63% or 142 million adults.

• The average number of overnight trips U.S. adults intend to take increased to 2.8 from 2.6.

Travel Bargains Unleashing Pent-Up Demand for Travel
The survey results suggest that the U.S. travel marketplace may be entering a new phase in which lower-cost travel opportunities are merging with travelers’ currently downscaled budgets to tap pent-up demand for travel. In this scenario, value is a central factor driving travel decisions. “Americans’ continued strong interest in travel and positive perceptions of its affordability are positive signs for the industry,” said Roger Dow, president and CEO of the U.S. Travel Association.
Source: U.S. Travel Association Press Release – 8/10/09
Source: Ypartnership Press Release – 8/10/09

Las Vegas Tourism Continues Decline but Holds Solid Levels
While Las Vegas continues to experience declines in tourism, the city is still maintaining respectable volume levels. According to the Las Vegas Convention and Visitors Authority, though the number of visitors to Las Vegas fell 6.3% in June, that still equated to three million visitors. While hotel occupancy declined 7.2 percentage points, the absolute rate was still a robust 82.2%, 28 percentage points higher than the national average of 54.6%. Visitors to Las Vegas are reported to be responding positively to available marketing programs and room rates that are discounted by 26% on the average.
Source: Las Vegas Sun – 8/11/09

Recession Clouds Florida Tourism
The recession is impacting Florida's tourism industry. Florida's hotels, theme parks and restaurants are losing business as out-of-state travelers vacation closer to home, or spend less time and money on trips to the Sunshine State. Once data is tallied for Florida’s fiscal year ending June 30, it is expected to show that visits by non-Floridians fell 9% and tourism-related tax receipts declined 6% or $235 million. Smith Travel Research data shows occupancy at Florida hotels was down 11% while room revenue fell 21%; the wide differential underscores the heavy discounting that prevails among hotels and other travel-related businesses.
Source: The Wall Street Journal – 8/15/09

Decline followed by Long-Term Growth Foreseen for Mexico Tourism
The World Travel & Tourism Council (WTTC) expects Mexico’s tourist arrivals to contract this year and subsequently grow steadily. Following a 5.9% rise to 22.6 million visitors in 2008, international arrivals grew still another 5.9% in the first four months of 2009. However, following the severe blow to Mexico’s tourism industry from the swine flu outbreak, WTTC is now forecasting a decrease of one third in arrivals for full-year 2009. But based on the government’s pro-active response to the crisis and the destination’s innate resilience, Mexico’s Travel & Tourism Economy GDP is projected to expand by over 6% in 2010 and 2011 and average 5% annual growth over the next decade.
Source: World Travel & Tourism Council Press Release – 8/10/09

Survey Shows Holiday Trips by British Travelers on the Rise
Data from VisitEngland based on the United Kingdom Tourism Survey show that holiday trips taken by residents in England in the first four months of 2009 are up 13%. That equates to 1.2 million more holiday trips taken and five million more holiday nights spent traveling than in the first four months of 2008. While overall trips in the same period remained stable at 27 million, the holiday sector has been boosted by the fact that British travelers are generally traveling closer to home this year. VisitEngland views the trend as a positive indication that British travelers are discovering the travel attractions within their own country.
Source: ehotelier.com – 8/7/09

Economy Batters Mediterranean Tourism Industry
This summer, Europe's Mediterranean countries are experiencing one of the worst tourist seasons in years. Tourist arrivals in the region are down 10% or more, outpacing an 8% decline in tourism worldwide. The World Travel & Tourism Council forecast for the Mediterranean calls for ten million fewer tourists equating to $20 billion in lost revenue for this year. Struggling hotel and tour operators are slashing prices, as visitors seek out bargain holidays and plan for shorter stays. Across the region, governments are taking robust initatives to support the sector.
Source: The Wall Street Journal – 8/7/09
Source: The New York Times – 8/12/09

North Korea Reopening Borders to Tourism
North Korea has agreed to reopen the border to its neighbor South Korea and allow tourism to start again. North Korea’s leader Kim Jong-il met with the chairperson of the South Korean Hyundai Group which runs tourism trips to the North. Tourism to the North was disallowed 18 months ago when a new conservative president of South Korea cut off aid to North Korea. The latest agreement will permit the restart of tourism to a number of popular tourism sites in North Korea.
Source: The New York Times – 8/16/09

Downturn Prompting Consolidation in Travel Agent Industry
The credit crunch, declines in travel demand, and economic uncertainty are prompting the travel agent industry to turn to mergers, acquisitions and consolidation. Many industry leaders see this course of action as the way to insure economic stability and develop future opportunities in a highly competitive $110 billion market. While a recent merger of two travel agencies garnered headlines, there is growing consensus that more transactions are underway impacting agencies of all sizes; smaller firms as well as large agencies are being advised that they can benefit from the synergies of a merger or acquisition.
Source: Travel Agent – 8/3/09