Hotel business is up but room rates remain a drag

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Hotel occupancy in Colorado Springs, year-to-date, is up more than 4 percent compared to the same time last year. But there’s no need to uncork the champagne just yet.

Occupancy is up because room rates are flat or down. Lowering room rates became necessary during the recession to attract visitors in a faltering industry. But now that the economy is recovering, it’s not a simple matter of hiking up rates to pre-recession days.

Each year about 6 million people visit the Pikes Peak region, generating more than $1 billion in travel-related economic activity.

Room rates might take years to return to the heady dollars of yesteryear, or 2007, as the case may be.

That said, as long as we compare our city to others in the state, the news seems brighter.

Colorado Springs shines like the light from the Summit House on top of Pikes Peak compared to Denver. In 2009, room revenue decreased a scant 1.6 percent locally, compared to a whopping 17.8 percent in Denver and 10.6 percent elsewhere in Colorado.

Likewise the Springs fares well in growth projections of 6.5 percent, while Denver’s and the state’s projections are 5.3 percent and 4 percent, respectively.

Although the lodging and auto rental tax, or LART — another indicator of health in the tourism industry — dropped 8 percent in 2009, it is projected, locally, to increase 8 percent this year and 5 percent next year.

Another performance benchmark is occupancy.

As of June, Denver’s occupancy increased 5.8 percent, while the state’s declined by 1.7 percent compared to June 2009. In the Springs, though, occupied room nights increased by nearly 31,000 rooms, or 6.4 percent, during the same time period.

Still, even though all of this sounds like plenty of reason to celebrate, the city is far behind where it once was.

In the late 1980s, the city used to capture 17 to 19 percent of the state’s occupied room nights, total revenue and available room nights, said Fred Crowley, senior economist with the Southern Colorado Economic Forum and an instructor in the College of Business at UCCS.

Crowley thinks the Springs needs to work harder to lure back those visitors.

“If Colorado Springs doesn’t re-brand itself as a tourism destination, then its market share and tax base aren’t expected to grow.”

El Paso County Commissioner Sallie Clark agrees. Clark has co-owned a Westside Victorian bed-and-breakfast, the Holden House, with her husband Welling Clark since 1986.

She said that more of their guests come from within the state, and they’re not staying as long as they used to.

“I think we’re all just treading water,” Clark said, referring to the increase in occupancy tempered by decreased or flat room rates. The B&B has had to continue offering discounts through July and August just to get people in the door.

Business has definitely changed with the times.

“It used to be that people would call in February and ask if we had room for Memorial Day and we’d laugh at them,” Clark said.

Nowadays, most reservations are made at the last minute via the Internet.

“The rooms don’t do any good for us empty, but there’s a break-even point,” she said.

“We do a $24 for 24. If you call 24 hours in advance, based on space availability, you get $24 off.”

The B&B also offer business rates and government rates, and has on-site business amenities.

Clark’s experience notwithstanding, Steve Ducoff, executive director of the Pikes Peak Lodging Association, said that business has been good this summer for nearly all of the association’s members.

“This summer has been fantastic,” affirmed Paul York, general manager of The Cliff House, a hotel in Manitou Springs.

Business started picking up in April, and occupancy by July had climbed to 79 percent compared to 54 percent in July 2009.

This increase didn’t come, however, without making major changes.

The hotel slashed its room rates and food and beverage prices by 30 percent last year. This season, the hotel saw the benefits of its price reductions. “But we’re working a lot harder for a lot less,” York said.

One change as a result of reduced rates is a sharp increase in the average number of nights per guest, from 1.2 nights to two to five nights.

Over at the Colorado Springs Marriott, occupancy has been up as well, said General Manager Jim Breeden. Much of the increase was from last-minute reservations and short-term group bookings, he said.

Along with many others in the industry, Breeden expects that room rates will go up a little next year, but, again, it’ll take several years for them to return to 2007 levels.

Rebecca Tonn can be reached at rebecca.tonn@csbj.com or 719-329-5229. Friend her on Facebook.