STR President Mark Lomanno

If you want to get Mark Lomanno in a tizzy, bring up the topic of hotel rates. The president of Smith Travel Research has a long-held belief that hotel owners, operators and more recently revenue managers are leaving money on the table through needless discounting. And never has that rate cutting been more apparent than through the industry’s recent downturn. During several presentations at last week’s Hotel Data Conference sponsored by STR, Lomanno showed graphically how the U.S. hotel industry has failed to regain pricing power even as demand is rebounds at a healthy clip.

“So far this year, rates have risen in every part of the world except the U.S.,” he said during an opening general session. In Asia/Pacific, rates are up nearly 11 percent through June over the previous year. By contrast, U.S. rates are down 2.0 percent. “There is a wide gap between the rebound in demand and the rebound in rates, and that should be a concern for all of us.”

Further complicating the turnaround is room supply growth Lomanno characterized as “stubborn.” Supply rose by 2.5 percent in the first half of the year, following three-percent-plus growth in 2009. “About 35,000 rooms were under construction last year, which about the minimum level for the industry,” said Lomanno. “The other problem is a fewer-than-normal number of guestrooms closed.”

According to STR, 116 hotels with 12,700 rooms left the inventory in 2009, compared to 729 properties and 50,600 rooms that closed in 2004. (Even more properties and rooms closed in 2005, but the numbers are somewhat skewed by closures in the aftermath of Hurricane Katrina in the Gulf Coast region.)

STR data also revealed the severity of the industry’s recent decline compared to other downturns. In 1990-91 (the Iraq War), ADRs remained slightly positive; in 2001-02 (following the Sept. 11, 2001 terrorist attacks), ADRs fell about five percent; last year, the drop was nearly nine percent.

“We believe future cycles will be even more severe, both in the downturn and on the upside,” said Lomanno. “The industry has more information, more tools and more technology and that means quicker reactions to rate dropping by competitors.”

Both Lomanno and STR Vice President Jan Freitag implored the industry to be more aggressive in its rate strategies. Freitag said hoteliers need to be careful in how they respond to upcoming RFPs for group business in 2011 and particularly 2012. “If you’re not aggressive enough, you may be giving rates that are too low,” he said. “You’ve got to trust that we’re in an upswing and rates with come back.”

There’s a lot riding on this trust. As Lomanno summarized, “Rate growth will ultimately determine the magnitude of our recovery. It’s up to the industry to make it happen.”

STR is somewhat optimistic in its latest forecast for 2011. It calls for a 2.5-percent increase in demand, a 1.4-percent lift in occupancy (to 57.9 percent), a 3.9-percent rise in ADRs and an impressive 5.3-percent increase in RevPAR.

During the conference, which was held at the Loews Vanderbilt Hotel, STR announced winners of its inaugural Best Performing Hotel Awards. Seven segment winners were chosen based on a combination of performance data, including occupancy, rate, and RevPAR. The winners:

• Luxury, Four Seasons New York
• Upper Upscale, Westin Sunset Key (FL) Guest Cottages
• Upscale, Homewood Suites, Jackson, WY
• Midscale with Food & Beverage, Quality Suites Oceanfront, Jacksonville Beach, FL.
• Midscale without Food & Beverage, Hampton Inn Chicago Majestic Theatre District
• Economy, Days Inn & Suites Jekyll Isle Oceanfront, Jekyll Island, GA
• Independent, White Elephant Hotel, Nantucket, MA.