Hotel Recovery in 2011?

Smith Travel Research is forecasting that hotel revenue and occupancy will make a recovery by the end of  2011. The report, which was released last week, stated that 2010 still was going to be tough with occupancy and revenue still posting numbers in the red. According to the report, 2009 will end with occupancy at -8.8 percent and 2010 with -0.2 percent. In 2011, the number will actually rise 2.4 percent.

Part of the reason that recovery is predicted is hotel development is at a standstill and that means there will be little or no supply growth. With supply lessened by 2011, only then can hotels be expected to raise revenue per available room because it will be the first time demand has risen. (Revenue is expected to rise 5.5 percent in 2011, after a drop of 17.1 percent in 2009 and 3.6 percent in 2010, according to the forecast.)

I don’t think Smith Travel  Research is going out on a limb in forecasting growth by the end of 2011. Most forecasters, including The Conference Board and the International Monetary Fund, are also predicting 2011 as the year where modest growth occurs (after a disappointing 2010.) But the report does shed some light on the idea that hotel developers bear some responsibility for their predicament — that too much growth or overbuilding, probably because of easy credit before the credit crisis, is a large part of the reason hotel rates and occupancy are down.