An important trend that we at Smith Travel Research have seen emerge is the stability of rate amid declining occupancy, particularly when looking at the U.S. hotel industry from a weekday vs. weekend business perspective.

Total U.S. weekend room revenue (billion $) April YTD 2006-2008

In fact, year to date, we cannot detect a slowdown at all—business travel seems to be holding steady. This is based on the encouraging performance of weekday demand. The majority of the travelers on the road during the week are probably traveling not because they want to but because they have to, i.e. they are on the road for business reasons.

Weekday demand share of total U.S. demand January 2001–April 2008 12-month moving average

Numbers for year-to-date April indicate a fairly healthy increase in demand from Sunday through Thursday. The year-over-year change is almost 2.3 million roomnights, compared to just a half-million roomnight increase from 2006 to 2007.

Total U.S. weekday demand (millions of roomnights) April YTD 2006-2008

Furthermore, in the first four months of 2007, the room demand we observed was 223.7 million roomnights sold on weekdays. As of 2008 YTD April, the number rose to 226 million roomnights, a 1-percentage-point change in demand.

Total U.S. weekend demand (millions of roomnights) April YTD 2006-2008

The weekend demand year to date is 94.3 million roomnights. However, we observed a steady drop in demand since 2006. Rooms sold dropped from 2006 to 2007 by more than a million roomnights and from 2007 to 2008 by 2 million, year to date.

Total U.S. weekday room revenue (billion $) April YTD 2006-2008

Since we define Friday and Saturday nights as the weekend, it is probably fair to assume that the leisure traveler is driving the decrease in demand. We assume that the weekend travelers are paying their own way, so it is safe to say that the larger macroeconomic picture is having an impact on the hotel industry. The tightening of the leisure traveler's wallet is caused by higher gas prices, the housing credit crunch and less availability of credit, specifically from home equity loans.

It is encouraging that weekday total room revenue increased from $23.4 billion for 2007 and is $24.8 billion for 2008 year to date. This suggests that not only are more people traveling, but at the same time the hotel industry was able toincrease room rates And this supports U.S. industry average daily rate growth as a whole.

In addition, weekend room revenue also has increased. Despite the decrease in rooms sold, room revenue has increased from $9.6 billion in 2007 to $9.8 billion in 2008 year to date. This shows that fewer travelers are generating more revenue than in previous years with positive implications for total U.S. ADR growth.

It will be interesting to follow the trend in ADR growth to see if decreases in demand will lead to further increases in rate or if operators will cut rates to induce additional leisure spending.

hmm@questex.com

Jan Freitag is vice president of Smith Travel Research ( http://www.smithtravelresearch.com/