industry_analysis - Team Andrews Cynthia Bernardez Rachel...

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-1 Team Andrews: Cynthia Bernardez Rachel George Carmela Trotta Yulia McArthur Industry Analysis: Lodging Penn State University According to the American Hotel and Lodging Association, at the end of 2006, 1
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there were 47,135 properties in the lodging industry, amounting to 4,389,443 guestrooms (www.ahla.com). Based on statistics from the American Hotel and Lodging Industry, in 2006 sales were in extent of $133.4 billion. The revenue per available room totaled $61.93. The average occupancy rate in 2007 was 63.3 percent (www.ahla.com). In 2006, the lodging industry generated $26.6 billion in pretax profits. Total industry revenue increased in 2006 to $133.4 billion up from $122.7 billion in 2005 (Smith Travel Research). Based on research from D.K. Shifflet & Associates, we are able to look at the profile of a typical lodging customer. In 2006, 44% of customers were traveling for business while 56% were traveling for leisure. The typical business room night is generated by a male (65%), age 35-54 (50%), employed in a professional or managerial position (44%), earning an average yearly household income of $85,900. Typically they travel alone (56%), make reservations (90%), and pay $112 per room night. The typical leisure room night is generated by two adults (42%), ages 35-54 (41%), earning an average yearly household income of $77,100. The typical leisure traveler also travels by automobile (77%), makes reservations (86%), and pays $103 per room night (D.K. Shifflet & Associates). For a hotel stay, 35% of all business travelers spend one night, 25% spent two nights, and 39% spent three or more nights. Of leisure travelers, 42% spend one night, 30% spend two nights, and 28% spend three or more nights (www.ahla.com). Between 1991 and 2000, the number of brands has grown from 140 to 188 which is a 34% increase (Price Waterhouse Coopers, 2001). Some recent studies also suggest that the level of competition could increase even further making it harder for firms to grow and cultivate their problems. It is predicted that the average hotel firm would continue to increase in size through a combination of new product development (I.e. extended stay, assisted living, time shares), mergers/acquisitions, and international expansion (Singh 1999). “The constant growth in the U.S. market is expected due to the stable economy which is enjoying a rare mix of low inflation, low employment, and stable GDP. Despite the fears of over development and another downturn for the lodging industry, almost all prognosticators are projecting hotel profitability to continue to grow in the market. The continued productivity gains, constant demand growth, and moderate supply growth will dramatically strengthen the industry’s profitability ( Keith Su).” While in previous years sales growth has increased, currently, hotel revenue per available room and average daily rate growth will flatten in 2008. However, travel buyers should expect another few years of a hotel seller’s market (PriceWaterCoopers, 2007). Price Water Cooper expects occupancy will drop only slightly to 62.9 percent in 2008, compared to a 63.2 percent forecast for 2007 (Bjorn Hanson). “2008 is within a few tenths of an occupancy point of the highest occupancies in 10 years.
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