US hotel demand declines continue into September

Occupancy at U.S. hotels continued to fall in the first week of September, a market research firm said Thursday, although room rates remained steady.

For the week ended Sept. 6, Smith Travel Research said occupancy at U.S. hotels dropped 7.3 percent year-over-year to 54.3 percent. The industry's average daily rate grew 1.2 percent to $100.73.

As a result, average revenue per available room at U.S. hotels fell 6.2 percent to finish the week at $54.70. Revenue per available room, or revpar, is considered a key gauge of a hospitality company's performance.

"The first week of September was challenging for the U.S. lodging industry," said STR Senior Vice President of Operations Bobby Bowers. "Hurricane activity was a contributor in some east coast markets, but weakness was fairly broad-based."

STR's report noted that industry performance fluctuated widely throughout the week, with revpar surging as high as 11.1 percent on Monday and falling as low as 14.8 percent on Saturday.

Oppenheimer & Co. analyst David Katz said Muslim observance of Ramadan, which started on Sept. 2 this year, may have skewed some of the comparisons with last year, when Ramadan started a week later.

Citi Investment Research analyst Joshua Attie called it "a disappointing result." He noted that concentrated weakness over the weekend, in vacation markets and at resorts implies that leisure travel remains weak.

U.S. consumers have cut back on travel spending as higher gas and food prices have eaten into their budgets and airlines have raised fares and reduced capacity.

Katz noted that revpar declines in the resort market during Labor Day weekend _ while other locations reported growth _ may indicate that leisure travelers are choosing to vacation closer to home.

Attie noted that urban hotels, a major earnings driver for the large public companies, declined for the first time this quarter.

Attie also expressed concern that room rates will begin to deteriorate later this year as hotel operators try to fill rooms by discounting. He said room rate declines would be more harmful to hotel margins than weak occupancy.

STR said it collects its data from more than 65 percent of the 4.6 million hotel rooms in the U.S.