Wichita-area hotel business has room for improvement

The area’s hotel business has improved, but it still has some catching up to do.

That’s according to area hotel executives and industry data, which show area hotel occupancy in the first half of 2013 was 57.1 percent, about sixth-tenths of a percent lower than the same period a year ago.

But that was better than the five-year low of 54.9 percent recorded in the first half of 2010, according to a report by STR, a hotel industry research firm.

Local hotel executives said a variety of factors have affected occupancy, including a sluggish recovery, lower corporate demand, Boeing’s departure from the Air Capital, and the addition of hundreds more hotel rooms in the area.

In better times, the area’s hotel occupancy rate runs at 64 to 65 percent, according to STR data. That’s a rate consistent with hotel occupancy for the U.S., which in the first half of 2013 was 61.8 percent, according to STR.

STR officials said the highest national rate posted since STR began tracking it in 1987 was 64.8 percent, which was reached in 1995.

Lea Firestone, chief operating officer of Wichita-based AG Hospitality, said business “continues to be a little soft.”

“I think probably the biggest issue right now is overall corporate demand is soft,” said Firestone, whose company operates four hotels in the area, including the Courtyard at Wichita Old Town. “It just hasn’t come back as quick as in other parts of the country.”

Kim Madison, general manager of the Best Western Wichita North Hotel and Suites and chairwoman of the Greater Wichita Area Lodging Committee, said the consensus among her and her peers “is we’ve lost a little bit of occupancy.”

Madison said Boeing’s closure in Wichita has meant a loss of 15,000 room-nights a year for area hotels.

Business travel is the big revenue generator for Wichita hotels, Firestone said, not tourism or weekend sports tournaments. “The bottom line is you still have to fill those rooms Monday through Friday with corporate business.”

That combined with the addition of new hotels to the area — such as the Ambassador Hotel downtown and the Kansas Star Casino’s Hampton Inn and Suites — also had an effect on occupancy for existing hotels.

“You’ve had a pretty significant amount of room supply added in the last two or three years,” said Bobby Bowers, vice president of operations at STR. “It could be a situation where, like the old saying, ‘It’s not over-built. It’s under-demolished.’”

STR, whose data are collected from hoteliers operating three-quarters of the area’s rooms, said 531 rooms were added in the area between June 2009 and June 2013.

Soft occupancy rates aren’t quashing new hotel projects in the area, however.

Next month, KAJ Hospitality of Mitchell, S.D., will open the Holiday Inn Express & Suites at 2340 N. Greenwich.

KAJ chief operating officer Greg Tankersley said the company has operated a “quite successful” Staybridge Suites at 2250 N. Greenwich (it will “share the parking lot” with the Holiday Inn, he said).

“And we feel the northeast side (of Wichita) is growing,” Tankersley said of the reasons behind the development of the Holiday Inn.

The hotel will open Sept. 17, he said.

Upward trend?

While occupancy has been soft, executives don’t expect that to last, and they are generally optimistic.

Both Madison and Firestone said they have been able to grow their business in the past year or so through rate increases, despite lower occupancy.

“There is opportunity in rate right now,” Firestone said. “That’s where you’re seeing opportunities for growth, in the average daily rate.”

“Going forward, we hope those two (rates and occupancy) catch up with each other,” he added.

Bowers, of STR, said the movement of room rates typically lags movement in occupancy, in up and down cycles. In a recessionary market, hoteliers want to hang on to as much revenue as they can for as long as they can. In the last downturn, he said, it took about 11 months after occupancy rates began their decline before hoteliers adjusted their rates lower.

Madison said it was last year when area hoteliers were able to begin adjusting rates higher.

“I think we’ll see a moving trend in occupancy and ADR as well in ’14,” she said.

Already, Madison said she’s seeing some improvement for her hotel in the second half of 2013, looking at its reservations. “It’s been a little bit of a nice surprise,” she said. “We’re actually coming off the high season, but it’s trending pretty well at this point.”