Augusta Business Daily

Friday, June 9, 2023

Simon Says: Upper-tier hotels have the upper revenue hand

Last week, I reported occupancy rates and revenue per available room for the hotel industry in Richmond County. Averages, however, do not provide information on the complete distribution. Upper-tier hotels had a better year than the average. Occupancy rates were up 0.7% (the average was a decrease of 8.8%), and revenue per available room was also up 0.7% (the average was down 4.5%). Total revenue for upper-tier hotels was 7.7% higher compared to a 4% decline on average. Upper-tier hotels represent 23 percent of all hotels in Richmond County, and 34 percent of all rooms, but generate over half the revenues.

Randall Blumberg, Chief Operating Officer of M&E Hospitality that manages the Hyatt House in Augusta, suggested two reasons why upper-tier hotels may be fairing better than the average. After the covid restrictions on travel, corporations and consumers are willing to spend a little more on more luxurious properties with more amenities. Corporations, mindful of the continued labor shortage, are willing to spend a little more to retain employees by providing peace of mind to their team members. Individual consumers are also enjoying travel again, and just like many upgraded their home amenities during lockdowns, renewed travel, and savings allow them to splurge a little more.

The Hyatt House is one of several upper-tier hotels that is fairing better than average in Augusta.

Marty Matfess, Chief Operating Officer of Singh Investment Group which manages several upper-tier hotels such as Doubletree and Hilton Garden Inn, identified some similar shifts as leisure travel demand increased and corporate travel beginning to return, although individual business travel has not returned to 2019 levels. Matfess also mentioned the cost associated with managing hotels. Hotels, like many businesses, have seen higher wage demands and higher costs for supplies, but because of their higher fixed costs and low(er) variable costs, they have been able to remain profitable.

Looking forward to the upcoming year, both Blumberg and Matfess are cautiously optimistic. Blumberg mentioned that demand is outpacing supply in the upper-tier sector and will continue for the next year or two, because rising interest rates on loans will limit new construction. Matfess identifies the competition from Airbnb in the local area as a challenge for the continued growth of leisure travelers.

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