Rhode Island’s hotel supply is growing faster than the demand for it, but the hospitality industry should still expect to see job growth in coming years, industry professionals said at a breakfast sponsored by the R.I. Hospitality and Tourism Association on Tuesday.
Rachel Roginsky, principal and co-owner of the Pinnacle Advisory Group’s Boston office, said the state’s hotel room supply increased by 2 percent in 2005, while demand dropped by 3.6 percent.
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Since 1999, Roginsky said, Rhode Island has experienced a 3.3-percent increase in supply, but demand only jumped by 1.2 percent. Overall, the outpacing has caused Rhode Island’s room occupancy rate to drop from 73.1 percent in 1999 to 64.3 percent in 2005.
“We are seeing an upturn in demand,” Roginsky said. “But we’re seeing a greater increase in the supply.”
In 2006, Pinnacle is anticipating occupancy rates ranging from 63 percent to 71 percent in the state’s three largest markets: Providence, Warwick and Newport.
In Providence, where Pinnacle projects a 68-percent occupancy rate this year, the city is anticipating seeing an increase in capacity when projects such as the 272-room Renaissance Hotel and the 200-room addition at The Westin Providence come on-line.
Roginsky said in her speech that both Newport and Warwick would benefit from not adding rooms. But tourism and hospitality leaders told Providence Business News that in both cities, there are either firm plans or rumors of plans to add more hotel rooms.
Roginsky’s findings did not come as a surprise to hospitality leaders at the breakfast last week.
J. Rudi Heater, former chairman of the Hospitality Association board of directors and general manager of the Crowne Plaza Hotel at the Crossings in Warwick, said all of Rhode Island’s markets are in the midst of “growing pains.”
While the expansion is happening because the demand is expected in the future, Heater said, hotels may have to deal with the gap between supply and demand for a while longer.
“The laws of supply and demand apply to hotels as they do to widgets,” he said.
Dale Venturini, president and CEO of the association, added that the trends outlined in Roginsky’s reports “represent a very tiny blip on the radar screen,” and “we’re going to see much more growth as the new supply comes on-line.”
Overall, however, Rhode Island still enjoys occupancy and average room rates above the national average. In 2004, Rhode Island had an occupancy rate of 64.2 percent, the highest in New England, while the U.S. average was 63.1 percent.
The average room in the state cost $115.29 in 2005, about $5 less than in Massachusetts, but still nearly $25 more than the national average.
The outlook for job growth in the hospitality sector appears more promising, according to Adelita S. Orefice, director of the R.I. Department of Labor and Training.
The hospitality sector, which already claims one out of every eight jobs in the state, is slated to jump from the year-round average of 54,450 workers in 2004 to 63,000 by 2012, she said. The peak-season total is slated to jump from 60,000 to 70,000, Orefice said.
Those numbers are in line with the National Restaurant Association’s projections that Rhode Island will have nearly 59,900 people employed at restaurants alone by 2012.
While the growth in jobs looks strong for the future, Orefice said that one of the difficulties within the industry has become selling it as a career.
Often, work is part time or seasonal. Those factors contribute to an average annual salary of $16,000, a figure substantially less than the state’s private sector average of $36,000, she said.
However, the biggest obstacle for getting people to commit to a career in the field is the perception that it is “dead-end.”
Those who have chosen the industry as a career know that is not true, Orefice said.
“Career ladder issues are incredibly important to any industry, and I think especially so in the leisure, hospitality and tourism industry.”
Orefice also highlighted some other issues facing the industry, including the increased competition among employers to hire workers and a growing immigrant population.
“This point drives our economy,” Orefice said, “not only as it relates to who you’re trying to hire, but as to the consumer side and who you’re trying to serve.”
