ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Sunday, January 7, 1996 TAG: 9601110141
SECTION: BUSINESS PAGE: D6 EDITION: METRO
SOURCE: JEFF STURGEON STAFF WRITER
MEMO: ***CORRECTION***
Published correction ran on January 19, 1996. Hotels and motels in
the Roanoke Valley had total room sales of $38.6 million during the
first 10 months of 1995, compared to $39.2 million during the same
period in 1994. A graphic in the Jan. 7 business section was incorrect
on that point.
Innkeepers expect a good year.
As 1995 ended, indicators of hotel and motel health were pointing up. The national hospitality industry appeared headed into its fifth year of recovery after its worst slump in 25 years.
"We will see more prosperity," said Mahmood Khan, who heads Virginia Tech's department of hospitality and tourism management.
Granger Macfarlane, whose Eastern Motor Inns Inc. of Roanoke operates four area hotels, can confirm the trend. He said 1995 was the company's best year in the 24 years it has been in business and that this year looks at least as good.
Last year, the Roanoke Valley lodging market fell below its potential, however, and has some ground to make up. At the end of October, the most recent period for which statistics are available, the region's hotels and motels posted an average occupancy rate of 62.2 percent, 8 percent lower than in 1994.
Still, industry observers seem encouraged.
"The bad times are somewhat behind us. The good times are ahead," said Robert Ramsey, executive director of the Virginia Hospitality and Travel Association in Richmond.
Although business travel may not increase, especially if national economic growth slows, average Americans are itching to travel, a phenomenon experts call pent-up demand, said Rod Sibley, an Atlanta-based regional vice president for Choice Hotels International of Silver Spring, Md.
Also, people attending the Summer Olympics in Atlanta are expected to take side trips to Virginia. People en route to the games are likely to make stopovers and foreign visitors are expected to vacation in the United States more this year.
Coopers & Lybrand, a national accounting firm, predicted hotel and motel guests will book 66.5 percent of all available rooms in the country, up 1.2 percentage point from last year. The average price of a room should rise to $69.84 a night, a 4.6 percent increase.
Yes, Sibley said, hotel rooms will costly slightly more, reflecting higher industry profits. But travelers have enjoyed bargain rates for several years, he said.
Some executives are worried, however, that growth could happen too fast. "The concern in the industry is that, because business is good, that there will be overbuilding" and then a slump or downturn, said Brown Kessler, vice president for franchise sales at Holiday Inn Worldwide, which is affiliated with at least six Roanoke-area hotels.
When the hotel business is good, the number of hotel and motel rooms expands as developers and owners open new properties and expand old ones. Construction activity can build such momentum that the supply of rooms outnumbers paying guests. Many innkeepers are then forced to discount the price of rooms or let occupancy levels decline.
Few in the industry want a repeat of the overbuilding that occurred in the late 1980s, which triggered the industry's worst recent slump, from 1989 to 1991. The period was marked by huge losses - the largest coming in 1990, when U.S. innkeepers lost a combined $5.5 billion. The national hotel occupancy rate hit a low of 60.9 percent in 1991.
Some who are not convinced that developers will again build too many rooms cite stiffer loan standards, with lenders now requiring developers to put up more of their own money for new projects.
During the last construction boom, a developer could get a loan to build a hotel or motel by having as little as 5 percent to 10 percent of the project's total cost in cash. Today, that percentage ranges from 25 percent to 30 percent, said Sibley of Choice Hotels.
LENGTH: Medium: 76 lines ILLUSTRATION: GRAPHIC: chart - Roanoke Valley Hotel Performance staffby CNB