Hot Regional Market Makes Hoteliers Happy

Full-service hotels in most markets across the Southeast are having a high-performance 1998 in terms of both occupancy and room-rate increases, with much of the strong demand attributable to groups, according to both industry analysts and spokespeople for the major chains.

"Overall, the performance of our properties in the South is at least on par, if not better, than the national average — which itself is up this year," said Fred Kleisner, president of the Starwood Hotels Group, which includes Westin and Sheraton-branded properties.

"In the region, our sun-and-fun properties, interior golf resorts and Birmingham are doing extremely well, and in total we expect to see high-single-digit Revpar [revenue per available room] growth for 1998."

Said Susan Hodapp, brand director for Marriott Hotels, Resorts & Suites, "Charlotte, Nashville, New Orleans, Raleigh and Richmond are all attracting a strong meeting mix and are performing at least as well as they did in 1997, which was a very strong year for us."

From Hyatt's perspective, "Savannah can do no wrong," said Rob Sarmiento, divisional director of sales and marketing for Hyatt's southern division. "We're seeing unbelievably high occupancy and strong rate movement there. In Charlotte, consolidation in the banking industry and the city's National Football League expansion team are putting the city on the map. Hilton Head and Knoxville continue to be strong as well."

Analysts, for the most part, supported this rosy view — from the full-service hotel's position, anyway — of the South.

"The strong economy encourages more people to travel for business or pleasure and to stay at full-service properties," said Mark Woodworth, executive vice president of PKF Consulting's Atlanta office. "But the number of meeting facilities in the South has remained relatively constant during this growth cycle, which means meeting in the off-season might be the only easy way for groups to get space."

"With some market-to-market variation, upscale properties in the Southeast continue to perform well," agreed Scott Berman, a Miami-based director in the lodging and gaming division of PricewaterhouseCoopers.

PKF Consulting reported room-rate growth in Nashville of more than 11 percent (and a 3.6 percent jump in occupancy) for the first quarter this year over the same quarter in 1997, and in Charlotte there was a 10.5 percent growth in the average daily rate in Charlotte — despite a dip in occupancy of 1.6 percent.

Are there any cool cities, where planners might find it easier to either bargain for better rates or book better dates?

PKF found first-quarter occupancy decreases of more than 2 percent and room rate growth of less than 2.5 percent in Little Rock, Memphis and Raleigh.

And what of Atlanta, the Southeast's convention giant?

Because of a pre- and post-Olympics infusion of hotel rooms, the city, in statistical terms, was one of the few soft markets in 1997.

But almost all of this room construction occured in the suburbs and in the limited-service market and thus had slight impact on the city's convention business downtown and in Buckhead.

"With all the limited-service properties popping up everywhere, I thought there would be a softening in Atlanta," said Hyatt's Sarmiento. "But the city is doing surprisingly well. Group demand downtown and in Buckhead continues to be strong. And with the expansion of the Georgia World Congress Center, I think the convention market will only get better. Thanks to its excellent airport, Atlanta is going to retain its appeal with Corporate America for a long time to come."

"We're not seeing any occupancy seepage as a result of all the limited-service build in Atlanta," said Starwood's Kleisner. "At the price points at which the Starwood brands operate, our guests are choosing among full-service hotels, not between full-service and limited-service ones. We're bullish on Atlanta; not only does it remain a strong magnet for domestic business, it also has a great future — as does the rest of the South — as a destination for international travelers."

Indeed, the first quarter of this year saw a sharp upturn in travelers to Atlanta over the same period last year. Occupancy was 3.3 percent higher and average daily rates were up more than 5 percent, according to figures from PKF.

Other areas where business is booming: New Orleans, which saw its first-quarter 1998 occupancy increase 1.6 percent to 76.5 percent, one of the nation's highest averages; the Mississippi Coast and its casinos; and Richmond, Va.

"Virginia is trending higher than most other regions because it started its economic recovery later and is just starting to peak," said Marriott's Hodapp.

Agreed Leslie Cox, corporate director of group sales for Omni Hotels, "The corporate group business in our Richmond property is growing significantly as a lot of companies are moving into the region. And with the convention center set to triple in size by 2002, the city has a great deal of potential."

With the essentially inverse relationship that hotels and meeting planners have, the good news from hotels is hardly cause for celebration among planners. The South, like most other parts of the country, is no place for bargain hunters.

But good news may soon be emanating from the South: It could be the first region in the country to see significant new build in the full-service segment.

"The region, due in part to its low development costs, is usually ahead of the rest of the country on the development curve," said PKF's Woodworth. "The region has already reached the saturation point in limited-service properties, ahead of the rest of the country. And new hotel construction traditionally goes in phases, working its way up the rate scale. So we'll likely see significant new full-service inventory come on line in the South first."

In the meantime, the region does have some attraction now for groups suffering from the sticker shock currently endemic among planners.

"Room rates in the South relative to the Northeast are very affordable," said Hyatt's Sarmiento.

Also, the region's less-expensive, second-tier and third-tier cities have become easier and cheaper to get to, said Starwood's Kleisner, because of the presence of budget-friendly regional airlines and because of an increase in the number of short-haul links between spoke cities and airline hubs (Delta in Atlanta, US Airways in Charlotte).

And while the summer is reduced-rate time for groups in most parts of the country, those groups able to meet in July and early August might especially want to consider the South, which is generally, if erroneously, considered too hot and steamy for summer conferences.

"All hotels in the South are soft in the summer, so deals are available," said Leslie Cox, corporate director of group sales for Omni Hotels. "In fact, we're contemplating some sort of incentive program for our salespeople to get them to book more groups over our need dates."

True, the summer is soft, said Hyatt's Sarmiento, but he said he has noticed a trend: The period that constitutes the summer doldrums is shrinking. "It's definitely more affordable in the summer," Sarmiento said. "But all of June now sees high occupancy, as does the second half of August."

The South's warm weather is contributing to another trend that planners should welcome: the building of conference-center resorts, with golf courses prominently attached.

Emblematic of what these properties may look like is the Westin Savannah Harbor Resort, set to open next year. The 403-room property, located on 290 acres with a championship golf course and spa, has 18,300 square feet of its own meeting space. More importantly for meeting planners, it is also being built next to the Georgia International Maritime & Trade Center, also opening in 1999, which will have 100,000 square feet of exhibition space and large amounts of meeting space.

The urge to build many more of these types of conference resorts in the South likely will be compelling for many hotel companies, according to Starwood's Kleisner, and not just because the winters are shorter and the land cheaper in the region. It's a demographic imperative.

"There are 50 million baby boomers, most of whom play golf or tennis, who take their leisure in short sound bites, and often have to combine it with business, like attending conferences," Kleisner said. "These types of conference resorts make a lot of economic sense."

Golf is also attracting many medical meetings to the South for some of the same reasons, according to Sarmiento. "Higher rates elsewhere are encouraging medical planners to look South, but their time-strapped attendees also want to be able to combine their meeting-going with golf, so the South is becoming very popular with them."

And of course, Southern hospitality still sells, said Kleisner.

"The service with a smile, the live oaks, the hanging moss: The South makes me very happy I'm still in hospitality," he said.