After a stretch in which the Great Recession successfully blew the tourism industry off course—global business travel dropped nearly 8 percent in 2009, as corporations slashed budgets—corporate road warriors, in addition to regular tourists, have at long last resumed their rounds. Hotel operators have responded by raising room rates.
Revenue generated by guest rooms increased 6.3 percent from 2011 to 2012, while the collective revenue from other areas—such as room service, spa use, retail, and in-room entertainment—suffered, with only 0.5 percent growth, according to a May 7 report issued by Atlanta-based PKF Hospitality Research. “In past recoveries, we haven’t seen this big of a disparity between the change in rooms revenue compared to the change in other revenues,” says Robert Mandelbaum, director of information services at PKF-HR. “Normally when the travelers come back after an economic downturn, the amount they spend on food and other categories is commensurate with the amount they’re spending on rooms. It’s not the case this time.”
It’s a curious dynamic, as hotel operators find themselves in a stronger position. “It wasn’t until 2012 and 2013 that we started to see hospitality managers say, ‘Travelers are back up and on the road; we can start to raise room rates,’” says Mandelbaum. “Especially for certain types of hotels—luxury ones, upscale ones, and ones in key gateway cities—they’re running occupancy levels in excess of 70 percent.” As the market for better rooms has become more competitive, prices have risen accordingly. But once travelers arrive in their more expensive rooms, they’re increasingly unwilling to splurge for a $14 bottle of Poland Spring water or a $28 club sandwich like they used to.
The hotels are adapting in a variety of ways—some are cutting back on room service. “We have seen hotel owners and operators react to this trend by reducing the levels of food and beverage service at their properties,” said Mark Woodworth, president of PKF Hospitality Research, in a press release. According to USA Today, some hotels aren’t ditching room service—they’re ditching the stuffy, upscale presentation. In other words, so long to expensive meals kept warm by steel plate covers and wheeled into your room by liveried servants.
At Ian Schrager’s new hotel Public Chicago, for instance, the room service will be delivered in a brown paper bag, to be consumed wherever the guest pleases. And at the hotel’s restaurant, where the menu was conceived by chef Jean-Georges Vongerichten, only one entree exceeds $30.