E.V. inns see more rooms booked, but profit lags - East Valley Tribune: News

E.V. inns see more rooms booked, but profit lags

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Posted: Tuesday, June 7, 2005 12:16 pm | Updated: 10:09 am, Fri Oct 7, 2011.

In 2004, East Valley hoteliers saw profits inch upward after several years of back sliding, but the recovery didn’t gain much steam until this year. Nationwide, hotel revenue hit an all time high of $113.7 billion in 2004, according to a report by industry trackers Tennessee-based Smith Travel Research.

Of that, $16.7 billion was profit, topping 2003’s take by more than 30 percent, Smith Travel reported.

It’s not quite as impressive as it seems.

The industry is still trying to catch up to the banner years of 1999 and 2000. During the travel drought that began in 2001, corporate travel budgets were slashed and leisure travelers, worried about their own financial future, cut back too. To coax tourists to fill up rooms vacated by the business bunch, hotels deeply discounted rates.

The ploy worked. Occupancy — the percentage of available rooms actually booked — improved, but because the rates were so low, the bottom line continued to sag.

In 2004, companies loosened purse strings, said Duane Vinson of Smith Travel, and that sparked the nationwide turnaround.

"The business traveler is back, and convention business is getting back to where it was in the late 1990s," Vinson said. "I don’t believe we’ll be back at 2000 levels, but we’ll be close."

For East Valley hotels, the 2004 recovery was felt even less than the rest of the country.

Locally, the hot tourism trade is at the beginning of the year, but the big boost began later in 2004, said Robert Brinton, executive director of the Mesa Convention & Visitors Bureau.

"There’s no question that the hotels did better in 2004 than in 2003," Brinton said. But hotel guests were still paying bargain rates, he said, so it didn’t show up on the bottom line.

Vinson said Phoenix metro area average daily room rate for January through March 2000 was $122.85. In 2004, it was $117.81 for the first quarter. It soared to $124.76 for first quarter 2005, Vinson said. With inflation and rising expenses, that still may be effectively lower than the 2000 take, Vinson said.

"But at least 2005 is the first year we won’t be looking back," he said.

While not all local hotels fared equally, several said 2005 is the real start of recovery.

"From a hotel operating standpoint, the Fiesta Inn had a good year in 2004, but not a great year," said Sherry Henry, general manager of the Tempe hotel. "In 2005, we are starting out to have a really good year. Each month for the first five we finished above budget on revenue and profit."

"(In) 2004 we stopped the bleeding from the two previous years," said David Muth, general manager of the Hilton Phoenix East/Mesa. "In 2005, occupancy is up a little, but room rate is up dramatically."

And meeting planners are upping the tab for food and beverage, Muth said. That’s a reversal of a trend during the last few years to scrimp on extras.

Muth estimates his revenue and profit for the first few months of the year are 10 percent higher than for the same period in 2004.

At the Scottsdale Plaza Resort, occupancy is up 15 percent to 17 percent so far this year, mainly because groups, the key market for the property, are getting bigger, said Karen Murray Boston, hotel spokeswoman.

"We’re hoping this positive trend will continue throughout the year," Boston said.

Still, the local hoteliers are not ready to rate the rest of the year yet.

Travelers, even business groups, are booking so lastminute, it’s difficult to predict even the short-term outlook, said Tom Silverman, general manager of the Chaparral Suites Resort in Scottsdale.

"You don’t give up on a night until the night is over, " he said.

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