Industry Update

As talk about the United States slowly emerging out of the worst economic recession since the 1930's depression, I wanted to communicate to you all once again that the hospitality industry is by no means out of the woods. Our industry typically lags by at least six months once the economic indicators tell us we are out of a recession and the recovery is in full swing. But this recession is different than the others. Current economic projections state that we will emerge very slowly out of this recession instead of experiencing the usual bounce as we have in other post recession periods. Meaning: The hospitality industry will likely emerge very, very slowly out of this current recession.
 

The December 2007-August 2009 recession saw hotel room rates and hotel occupancy’s dip to levels that haven’t been seen in some cities in over 20 years. Job layoffs have affected travel as we are still knee deep in high unemployment figures. Companies are still sending fewer delegates to attend most conventions. The negative impact the heightened level of scrutiny travel has received has caused fewer companies to send employees on the road. And the emerging comfort of corporate business individuals willing to hold more meetings online have formed the perfect storm of sorts which will make for a longer recovery period for the hospitality industry before we ever get back to where business levels were just a few short years ago.

The Louisville Convention & Visitors Bureau 2009-2010 convention marketing campaign is being built around client testimonials. We will be featuring new clients on why they selected Louisville in our ad campaign. I think you all will be proud of our industry and your community once you have read their comments. It’s an all out battle for business these days as top tier cities are scrambling for business and their survival. We will continue our quest to bring major conventions to Louisville.

But as I stated before we can never rest on our laurels. Nor can we take advantage of our existing customers when their contracts are up for renewal. They are being impacted the same way as all other conventions are being impacted by the economy. And it’s definitely not the time to start artificially inflating hotel room rates to our existing customers. And it’s definitely not the time for our hotel partners to pull room blocks or worse, not offer room blocks to our clients with the intent of offering rack rate during their convention. In today’s economy that’s a risky proposition. Without secured room blocks, our clients will eventually move their convention to another more accommodating city. Without a solid base of convention business on the books we’ll see our occupancy and room rates plummet. And it will be far more difficult to drive rate when our convention halls sit empty.

For the past 18-months the Louisville CVB has been monitoring cities that have had the least amount of decline in occupancy and room rate year-over-year. The common thread with each of them is that they have a significant amount of convention business already on the books. Recently Louisville lost several major convention bids to cities suffering in high losses of hotel occupancy. Those cities along with their hotel partners have now recognized (again) the need to build and retain a solid base of convention room nights. But this time it’s for the long-haul. They can no longer rely on the corporate traveler to sustain their growth.

The following is a rate and occupancy chart of twelve cites within our competitive set including Louisville. Pittsburgh, PA has seen the least amount of decline with a 5.2% decline in occupancy year-over-year. Congratulations to you all as Louisville is second with a 5.3% decline year-over-year. No decline is good but given the circumstances we're doing better than most. The biggest loss of hotel occupancy in our competitive set year-over-year through August are: Charlotte, NC down 16.9%; Atlanta, GA down 12.9%; Birmingham down 12.6% Nashville down 11.6%.
 

SOURCE: Smith Travel Research

Please help us as we all work together to build a solid foundation for Louisville in the future!!!