Hotel-room boom makes discounts scarce

Tried finding a great rate on a hotel room at the last minute lately?  Good luck. Analysts say thanks to a strengthening economy, business travelers are hitting the road again in droves. And just as demand seems to be picking up, the supply of rooms remains tight.

That means the lodging industry is set for its best year since 9/11 — and travelers are scrambling.

On Thursday, Marriott International Inc., the biggest hotel operator in the U.S., said its first-quarter profits rose 27 percent. The company credited an upswing in travel that has dirven room rates and occupancy higher. Marriott said it expects that growth in demand for rooms to continue and raised its earnings forecast for the rest of the year.

“Hotel rates are going up quite significantly — right now on a year-over-year basis they’re up about 7 or 8 percent,” said Susquehanna Financial Group lodging analyst Robert LeFleur. “You go to any big city right now and try to get a last-minute room on a Tuesday, Wednesday or Thursday, you’re going to be in pretty tough shape.”

Analysts say those higher weekday bookings are a sign that business travelers — grounded by tight corporate travel budgets follow the post-9/11 economic slump — are hitting the road again.

But while road warriors are back crisscrossing the country again, the numbers of rooms out there isn’t keeping up with demand. The hotel industry typically adds new rooms at the rate of around 2.5 percent a year, according to Jan Freitag at Smith Travel Research, which tracks room rates and occupancy. But over the past year and half, capacity has grown at only about half that rate. The result: If you don’t book in advance for popular destinations, you may locked out.

Higher occupancy and room rates will eventually spur construction of new hotels, say analysts. But it will take at least another year or two before those added rooms are available. And in some bigger cities, the process of developing a new hotel can take even longer.

‘Sitting pretty’
“So for the time being, if you’re a hotel, you’re sitting pretty,” said Freitag. “And if you’re a traveler, you’re paying the premium.”

A weak dollar is also drawing more overseas travelers to major cites like New York and Los Angeles. But while hotel rates are rising overall, the rebound has not hit all destinations — so there are still hotel bargains to be found.

“Recoveries tend to start on the coasts and work their way in, and this recovery is no different,” said LeFleur. “So New York is a much stronger market than, say, Chicago.”

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