Small town, budget hotels hold own in difficult economy

August 3, 2009

While the local hotel industry is being rocked by the current economy, budget hotels and those in the small towns surrounding Indianapolis are actually seeing gains.

Tennessee-based Smith Travel Research, an industry leading hotel and travel research firm, recently released data for the first six months of 2009 showing local small town hotels saw occupancy increase 1 percent, to 50.2 percent, compared to the same period last year.

Budget hotels, the lowest cost of five categories listed in the Smith Travel data, also registered a 1 percent occupancy rate increase, to 55.2 percent.

Those gains are significant in a year when hotel occupancy across the board is down 11 percent in Indianapolis.

Hardest hit in Indianapolis are those known as “upscale hotels,” the second-most expensive category. They saw an occupancy rate drop of 15.4 percent, to 50.5 percent, in the first half of 2009 compared to the same period last year.

Upscale hotels saw average revenue generated per room—a key gauge of a hotel’s financial health—drop a whopping 20.6 percent. Indianapolis’ luxury hotels, the city’s most expensive, saw an occupancy rate drop of 11.5 percent, to 57.8 percent, as the economic swoon gripping the region and nation continued.

Midprice hotels saw an 11.5 percent occupancy drop and economy hotels saw an 11.2 percent decrease. Revenue per room for economy hotels dropped 19.1 percent, to $18.93, in the first half of 2009, bringing it below the average revenue per room brought in by the lowest-price category, budget hotels, which were at $19.70.

In Indianapolis, the problem is being compounded by ongoing construction at the Indiana Convention Center and a slowdown in major sporting event attendance, said Don Welsh, Indianapolis Convention & Visitors Association CEO.

Several local hoteliers said they could not get guests for the usual three-night-minimum stays for events such as the Indianapolis 500, Brickyard 400 and Big Ten men’s and women’s basketball tournaments.

The Smith Travel data bears that out. Occupancy is down at hotels in the Speedway/airport area by 17.9 percent during the first half of this year. Revenue per room also dropped in that district by a stunning 22.4 percent, to $32.13.

Hotels on the north side saw a 7.6 percent decline, but that area could see improvement in the second half of the year thanks to the U.S. Men’s Open at Crooked Stick, a golf event that is projected to net the area 7,000 hotel room nights.•


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