Volvo race hotel boost projected as limited

SOURCE: PINNACLE ADVISORY GROUP
OCCUPANCY RATES for Newport hotels since 2004. The city is expected to get a small boost from the Volvo Ocean Race.
SOURCE: PINNACLE ADVISORY GROUP OCCUPANCY RATES for Newport hotels since 2004. The city is expected to get a small boost from the Volvo Ocean Race.

The upcoming Volvo Ocean Race has already provided a boost in lodging in Newport and across the state for 2015, state hospitality proponents say, yet a forecast from a regional expert is for hotel occupancy rates in Newport to grow by only 1 percentage point.
That projected data struck a nerve last week for some at the Cranston-based Rhode Island Hospitality Association’s Economic Outlook Breakfast at the Rhode Island Convention Center.
Rachel J. Roginsky, principal of the Pinnacle Advisory Group, a Boston-based hospitality consulting firm, shared Smith Travel Research data on occupancy, average daily room rates and revenue per available room, known as RevPAR, for the state, as well as for Providence, Warwick and Newport.
For Newport, occupancy was at 59 percent in 2013, and is projected to stay the same by the end of 2014, but likely to increase by 1 percentage point, to 60 percent, in 2015, Roginsky said.
Average daily room rates could climb from $196 to $203, while RevPAR could grow from $115.64 to $121.80, Roginsky said.
After the presentation, Allison Schumann, hotel manager for The Vanderbilt Grace in Newport, questioned the low projection. Schumann said the trend for 2014 has been positive and in her work locally and statewide she sees that as continuing.
“I feel really positive about 2015,” said Schumann. “We’ve had a lot of inquiries, people looking to spend money and be here. They know what they want and they’re asking a lot of good questions.”
By June, the Volvo had already locked in 4,500 nights of lodging for this year and next – a number that continues to grow not only in Newport County, where the race will make its stopover, but statewide. Newport’s stopover from May 5-17 is the only North American respite in the international sailing race, which starts Oct. 4 in Alicante, Spain, and finishes in Gothenburg, Sweden, on June 27, 2015. At the meeting, Roginsky explained that the Newport Marriott will be closed for renovations for three months, but will reopen in time for the Volvo. That will drive down the occupancy rate, even though surrounding facilities may pick up the slack, she said.
Afterward, Roginsky noted that since the Volvo is coming in May, a normally busy time in the tourist season, its impact on occupancy rates will not be as dramatic as if it were coming in the off-season. That said, she added, an uptick in demand is definitely expected.
“Historically, with occupancy,” she said, “when things are really cranking, the market does 63 percent in Newport. On average, Newport is in the high 50s, [so] we are suggesting Newport will do better than the average.”
While Roginsky does not provide a statewide forecast, the three key cities – Providence, Newport and Warwick – were depicted individually as maintaining slow and steady growth in lodging – the same mantra repeated last year and this year by a second presenter, B. Hudson Riehle, senior vice president of the research and knowledge group at the Washington, D.C.-based National Restaurant Association.
In fact, both Riehle and Roginsky said that essentially since the recession in 2009, the restaurant and lodging industries have continued to grow incrementally.
“There’s a ladder that’s going up,” Roginsky said. “Every single year, we see improvement, whether it be some years stronger in rates, some years stronger in occupancy. Rhode Island lodging markets are still climbing, and it’s a slow climb, a five-year climb.”
That runs parallel, generally, with the gradual increased business not only in restaurant destinations, but also in the take-out “off-premises” market, with the latter driving growth, Riehle said.
Even though population growth in Rhode Island is projected to remain the same, at two tenths of a percent, he said, disposable income is projected to be “incrementally positive” by eight tenths of a percentage point, increasing from 1.8 percent in 2014 to 2.6 percent in 2015. Likewise, employment is expected to rise four-tenths of a percentage point, from 1.4 percent this year to 1.8 percent next year. Riehle’s projections came at the tail end of a comprehensive look at national statistics that show economic pressures still in force despite sustained increases overall and pent-up demand.
Riehle also recommended targeting millennials, the 18-34 age group that is paying increased attention to technology and so-called demand pricing, in which menu prices can be changed by the time of day, providing cheaper prices at off-peak times, for instance. Younger consumers are responsive to this type of marketing, and “that is the group that is going to be there for the future,” he said.
“It’s just one more thing we have to pay attention to,” said Dale Venturini, president and CEO of the Rhode Island Hospitality Association, after the meeting. “Our business is complicated as it relates to regulation, but also as it relates to marketing. There’s not just one [solution]: you can’t just put all this massive technology in, because then you’ll scare away the [older patrons],” she said.
While growth has been slow and steady overall for restaurants, Robert Bacon, chairman of the state association’s board of directors, said taxes, health care and energy costs continue to burden the entire industry.
“We need to see growth in order to maintain any margins at all,” he said.
In fact, overall, for both restaurants and lodging, that slow, steady growth remains precarious, and is one of the reasons the association actively monitors new legislation, he added, “because I don’t think it would take much to tip the scale in a negative direction.”

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