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Indianapolis hotels see sharp increases in room revenue

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The Indianapolis hotel market in 2012 is poised to record a rare, double-digit percentage increase in revenue per available room, a key measure of the health of the lodging industry.

So-called RevPAR will grow 10.8 percent from 2011, according to recent projections from San Francisco-based PKF Consulting. The figure is calculated by dividing daily room revenue by the number of rooms available.

PKF projects 2012 RevPAR of $53.00, up from $47.82 in 2011. Indianapolis hoteliers haven't seen such a huge increase in the nearly 25 years for which PKF data is available. But their optimism might be tempered by the fact the number is skewed by the biggest event the city has ever hosted.

“You can attribute it almost solely to the Super Bowl,” said Mark Eble, a hotel consultant and Midwest regional vice president for PKF. “That distorts the year.”

The Super Bowl was played in early February. In the first quarter, RevPAR spiked a whopping 39.3 percent from the year-ago period. The number is expected to increase no more than 3.8 percent in the remaining three quarters of 2012, however. (Second-quarter figures aren't yet available).

Still, the 10.8-percent jump in RevPar forecast by PKF for this year is on top of a robust, 9.3-percent increase recorded in 2011. The upswing may signal a resurgence for an industry dragged down for several years by the weak economy.

RevPAR in Indianapolis rose just 2 percent in 2010 and falling 3.6 percent in 2008 and 15.2 percent in 2009.

The weak market caused a rash of hotel bankruptcies in Indianapolis and across the country. In February, for instance, an affiliate of Fishers-based Dora Brothers Hospitality Corp. sought Chapter 11 protection for the Comfort Suites City Centre on the southwestern fringe of downtown. Court records say its largest creditor, New York-based German American Capital Corp., is owed $12 million.

In November, affiliates of Indianapolis-based MHG Hotels LLC that own a Comfort Inn in Avon and a Comfort Suites in Fishers filed for bankruptcy protection. Four other MHG hotels—Fairfield Inns in Noblesville and Seymour, a Quality Inn on South Harding Street in Indianapolis, and a Holiday Inn in the Chicago suburb of Aurora—slid into bankruptcy court in 2010.  MHG filed a reorganization plan in May and hopes to exit bankruptcy soon.

“Many of those [troubled hotels] were built in the boom years and opened with a high degree of leverage, and went sideways very quickly,” Eble said. “The silver lining to the cloud is that the pipeline for new hotels is quite small. That’s good as people recover.”

The upscale Canterbury Hotel in downtown Indianapolis is reveling in the rebound. For the first six months of 2012, RevPAR for the 99-room hotel is up 35 percent, General Manager Mark McClure said.

“That’s very unusual, and it’s mostly because of the Super Bowl,” he said. “But the last two months have been very solid for the city, so it’s been a good year so far.”

City hotels should receive a further boost from two major events this month. Gen Con Indy, one of the city’s largest conventions, runs Aug. 16-19 and coincides with the Aug. 19 Red Bull Indianapolis GP motorcycle race at Indianapolis Motor Speedway. The two events are expected to draw more than 100,000 visitors between them.

“While we have lots of major events and conventions like Gen Con and Moto GP, and the Big 10 football championship, a lot of things can happen,” said Chris Gahl, spokesman for the Indianapolis Convention and Visitors Association. “The third quarter will be extremely critical to continue that forward movement.”
 
Room rates still will fall far short than what local hoteliers commanded during the Super Bowl.

The average daily room rate in the first three months of the year rose 24.4 percent, to $102.94, an amount unheard of in Indianapolis. Room rates for the remaining three quarters of the year are not expected to be much more than $86, according to the report.

Average occupancy among all Indianapolis hotels is expected to hit 59.1 percent in 2012, the highest it’s been since 2007.
 

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