Hotel segment expects to see growth continue at a moderate rate

Nation's Restaurant News,  July 23, 2007  by Ron Ruggless

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Travel trend indicators foretell modest increases in hotel patronage by business and recreational lodgers, on top of the booming rates of 2004-2006, but hoteliers who hope to feed those guests can expect the growth pace to slow this year. Meanwhile, hotels also are continuing to outsource their foodservice operations, which lessens in-house revenue streams. Overall, foodservice sales as reported by hotel brands' parent companies were mostly flat to slightly higher in 2006.

Marriott International this month pared its forecast for the rest of 2007, saying that revenue per available room--"RevPar," in hotel parlance--was likely to grow 6 percent to 7 percent. Earlier in the year, Marriott had forecast growth of 6 percent to 8 percent.

However, the Travel Industry Association said it expects this summer's leisure travel to increase 1.4 percent over last year.

"Underlying our optimism are relatively good economic fundamentals," says Dr. Suzanne Cook, senior vice president of the nonprofit TIA. "Higher gasoline prices are having somewhat of an effect on consumer spending power.... We do expect some consumers to adapt to the economic realities by modifying their travel behavior in response to higher prices in many travel services."

Hotels already were experiencing some leveling off of occupancy rates and revenues from the three-year boom that followed several years after the slump caused by the 2001 terrorists attacks.

Smith Travel Research says first-quarter 2007 occupancy rates for U.S. lodging reached 59.5 percent, down 0.9 percent from the first three months of 2006. First-quarter average room rates increased 6.1 percent, to $102.71, and RevPar, which factors occupancy and average room rate, rose 5.2 percent for the quarter to $61.14.

"First-quarter RevPar growth was good against very difficult 2006 comps," says Mark Lomanno, president of Smith Travel Research. "We anticipate better demand growth in the second half of 2007 along with increased room-supply growth. Based on current trends, we believe full-year 2007 RevPar will increase around 6 percent."

The trend of the past decade of hotels turning to outside operators for their foodservice operations continues.

For example, MHI Hospitality Corp. of Williamsburg, Va., recently signed a lease with Big Steaks Management LLC to operate a Ruth's Chris Steak House at its Hilton Wilmington Riverside Hotel in Wilmington, N.C. The steakhouse is expected to open at the 273-room hotel in January.

"This represents the first destination of this highly regarded American steakhouse on the Carolina seaboard," says Andrew Sims, president and chief executive of MHI. "With its national reputation and exceptional quality menu, the addition of this restaurant is an integral part of our asset enhancement plans."

A new Marriott Renaissance property in Baton Rouge, La., has tapped New Orleans restaurateur Dickie Brennan to open a foodservice outlet in the development.

Brennan, who owns and operates Dickie Brennan's Steakhouse, Palace Care and Bourbon House, says property developer Mike Wampold of the Wampold Cos. sought the yet-to-be-named restaurant.

"For years we've wanted to create a restaurant that would make Baton Rouge proud," Brennan says. "And from beginning conversations with Mike Wampold, we felt this was the right opportunity."

Wampold was one of the developers of the Astor Hotel in New Orleans, where Bourbon House is located.

Mergers in the hotel segment also continued. In April, Harrah's Entertainment Inc. shareholders approved a merger of the company with affiliates of Texas Pacific Group of Fort Worth, TeXas, and Apollo Management LP of New York. The deal, valued at about $17.1 billion, was expected to close by the end of 2007.

rruggle@nrn.com

HOTEL CHAINS RANKED BY U.S. SYSTEMWIDE SALES

LATEST-   PREC.-                              FISCAL
 YEAR      YEAR                                YEAR
 RANK      RANK    CHAIN                       END

  1         1      Westin Hotels & Resorts   Dec. '06
  2         2      Harrah's                  Dec. '06
  3         3      DoubleTree, Club &        Dec. '06
                   Guest Suites hotels

                                    U.S. SYSTEMWIDE FOODSERVICE SALES *
LATEST-                                (BY FISCAL YEAR, IN MILLIONS)
 YEAR
 RANK     CHAIN                         LATEST   PRECEDING    PRIOR

  1       Westin Hotels & Resorts       $375.0     $362.0    $351.0
  2       Harrah's                       270.0      290.0     315.0
  3       DoubleTree, Club &             222.0      220.0     212.0
          Guest Suites hotels

          TOTALS:                       $867.0     $872.0    $878.0

* Actual results, estimates or projections

Source: NRN Research

HOTEL CHAINS RANKED BY NUMBER OF U.S. UNITS

LATEST-   PREC.-                               FISCAL
 YEAR      YEAR                                 YEAR
 RANK      RANK    CHAIN                        END

  1         1      DoubleTree, Club & Guest   Dec. '06
                   Suites hotels
  2         2      Westin Hotels & Resorts    Dec. '06
  3         3      Harrah's                   Dec. '06

LATEST-                              YEAR-END NUMBER OF UNITS *
 YEAR
 RANK     CHAIN                      LATEST   PRECEDING   PRIOR

  1       DoubleTree, Club & Guest     158       157       154
          Suites hotels
  2       Westin Hotels & Resorts       83        80        77
  3       Harrah's                      14        15        18

          TOTALS:                      255       252       249

* Actual results, estimates of projection

Source: NRN Research

HOTEL CHAINS RANKED BY GROWTH IN U.S. SYSTEMWIDE SALES
(Year-to-year percentage change)

LATEST-   PREC.-                    FISCAL     LATEST *   PRECEDING *
 YEAR      YEAR                      YEAR        VS.          VS.
 RANK      RANK    CHAIN             END      PRECEDING      PRIOR

  1         2      Westin Hotels   Dec. '06      3.59         3.13
                   & Resorts
  2         1      DoubleTree,     Dec. '06      0.91         3.77
                   Club & Guest
                   Suites hotels
  3         3      Harrah's        Dec. '06     -6.90        -7.94

                   AVERAGE:                     -0.80        -0.34

* Actual results, estimates of projection

Source: NRN Research

HOTEL CHAINS RANKED BY GROWTH IN NUMBER OF U.S. UNITS
(Year-to-year percentage change)

LATEST-   PREC.-                      FISCAL     LATEST *   PRECEDING *
 YEAR      YEAR                        YEAR        VS.         VS.
 RANK      RANK    CHAIN               END      PRECEDING     PRIOR

1         1        DoubleTree,       Dec. '06      3.75        3.90
                   Club & Guest
                   Suites hotels
2         2        Harrah's          Dec. '06      0.64        1.95
3         3        Westin Hotels &   Dec. '06     -6.67      -16.67
                   Resorts

                   AVERAGE:                       -0.76       -3.61

* Actual results, estimates of projection

Source: NRN Research

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