What happened to the Vegas development boom?

Sometimes you come across a data point that makes you do a double take—or, in the case of my perusing STR’s latest U.S. pipeline numbers last week, almost choke on your turkey sandwich.

Have you cleared your airways? Here it comes: There are only 96 new hotel rooms under construction in Las Vegas.

Only 96! In Las Vegas! The country’s largest hotel market!

This is Sin City we’re talking about here, people—the desert oasis that saw a development boom that injected 9,104 rooms into the market during 2009. Granted, it’s not New York City, which has more than 6,000 rooms under construction, according to STR’s March pipeline, but nobody’s been able to measure up with the behemoth Big Apple for years now.

CityCenter (pictured) added nearly 6,000 rooms to the Las Vegas hotel supply in December 2009.

So back to Vegas … only 96 rooms … wow.

To put things in perspective, Las Vegas has half as many rooms under construction as Detroit, one-third as many as Anaheim, and one-fourth as many as Oahu Island.

Now maybe I’m blowing things out of proportion here, but I can remember a time when seemingly every story coming out of Nevada concerned the crushing influx of supply in the market. CityCenter alone accounted for nearly 6,000 hotel rooms in one month, while another 3,000-room project, The Cosmopolitan, loomed on the horizon. The year was 2009—a 12-month span when demand was plummeting like the luck of a novice card shark at the Black Jack table. “The market would never be able to absorb the supply,” several pundits said, while others hurled charges of cannibalization.

Were their claims justified? Partially so. While total room nights occupied fell only 2.3% during 2009 (including a meager 0.4% drop during December when CityCenter came online), ADR took a 22% nose dive, according to the Vegas CVB.

Room nights occupied improved 3.3% during 2010, while rates increased 2.0%.

Through February 2011, total room nights occupied is up 6.8%, and ADR is up 4.6%.

So while it certainly didn’t help matters during 2009, Vegas’ development boon doesn’t seem to have had a devastatingly lasting effect on the market (at least none more so than would have been the case in the face of an unprecedented global economic downturn).

Still, I’m sure area hoteliers have welcomed the respite during this 96-room lull. With an additional 3,071 rooms in various stages of planning, according to STR, they don’t have very long to catch their collective breath.

I was robbed—many of you were, too

Show of hands: How many of you were robbed during the past week?

I was—and I bet most of you were, too. The stolen item in question? Personal data.

Sometime last week, hackers wormed their way into the supposedly secure servers at Epsilon, a marketing company in Texas that stores the names and email addresses of more than 250 million consumers for companies around the globe—companies like Hilton Worldwide and Marriott International and Red Roof Inn and Ritz-Carlton and Best Buy and Target and Walgreens and U.S. Bank and Brookstone and L.L. Bean and … phew! (The list keeps going.)

Fortunately, no financial information was breached, and the victims—that’s you and me, dear reader—likely will only suffer some unwanted spam.

We here at HotelNewsNow.com have covered data security in the past, and I encourage you to view our special report, “Data security 101” for a refresher.

This particular instance, however, is noteworthy for three reasons:

1) The sheer breadth of the breach. We’re in an increasingly digitized, interconnected world, folks. A security gap in Texas can now affect people anywhere from Cleveland (that’s me) to Copenhagen. It’s both fascinating and frightening at the same time.

2) How commonplace this type of occurrence has become. When I received an email yesterday morning from Hilton HHonors alerting me to the possible breach of my account, I didn’t spit out my Kashi GoLean Crunch in a state of abject horror. I simply skimmed through the message, shrugged my shoulders and went on with my day. Or as a fellow editor put it during our daily news meeting: “This type of stuff just happens all the time.”

It amazes me we’re at a place where one of the biggest breaches doesn’t cause us to bat an eye. Maybe we’ve gotten so used to sending our credit cards numbers and birthdates and other personal info online that we expect a hack or two to chip away at our personal identities.

Now, don’t get me wrong. I’m not advocating against hotel companies working to prevent cyber attacks. They risk serious liability (in the form of millions and millions of dollar in lawsuits) for subpar security precautions online—not to mention the black eye on the company brand and reputation that could result.

Which brings me to my third point …

3) The proficiency of the company response. That HHonors email I mentioned earlier? I received it before I read or heard a single story about the breach from any news outlets.

Companies have gotten very good at responding in the face of these attacks. Hilton, for example, quickly acknowledged the problem, explained who and what data was at risk, and outlined the ramifications. It also suggested some precautionary tips for members and underscored its commitment to address the manner and strive for better data security in the future.

Mere lip service? The cynics among you might think so. But I’ll take a more optimistic viewpoint. Despite their shortcomings, companies like Hilton and Marriott deserve kudos for acting fast and keeping the lines of communication open. As public relations guru Rich Roberts said in his column last year, “Hotel brands must own up to security shortcomings, disclose plans for fixing their problems (without, of course, revealing information useful to the crooks), commit to data-security standards established by the PCI Security Standards Council and pledge prompt, public notification of any future breaches.”

• Read “Public trust at risk in data breach.”

‘I stayed at an Expedia hotel’

"We have now created an entire industry whose primary purpose is to drive our pricing down. People say, ‘I didn’t stay at a Marriott or Holiday Inn, I stayed at an Expedia hotel.’”

The mood was still rather dour when STR founder Randy Smith made the above declaration during his keynote address at the 2010 Cornell Hospitality Research Summit. The month was October, and the most recent performance data showed an industry still struggling to stop the hemorrhaging of average daily rate. (At the time, year-to-August declines measured 1%—a figure made worse when taking into account the deplorable comps from the year before.)

Yes, the proverbial green shoots of recovery had sprouted, but we were still a long way from greener pastures—not that we even had our hands on the wheel to drive there. The OTAs were in control, many argued. They emphasized price at the expense of experience, all while whitewashing our exceptionally varied product into one indistinguishable commodity.

So when Smith decreed that hotel product in the United States essentially was as generic as the cereal selection at a discount food mart (my words, not his), there was nothing particularly surprising about it.

Why, then, do I bring up a five-month old quote that bore little impact on the overall state of the industry? A little thing I like to call salience.

Smith’s observation was the first thing I thought of when I read lastthis week that Expedia had officially launched its loyalty program, Expedia Rewards. The program allows members to earn points on the hotels, flights, packages and activities they book on Expedia.com—points that will allow them to book free travel on more than 140 airlines and at more than 70,000 hotels worldwide.

Does this spell the end of the hotel industry as we know it? Hardly. For one thing, the industry is showing signs of recovery, and hoteliers are slowly returning to a position of pricing power. They have more pricing power than they did last year, more demand, more reservations on the books and less competition from new supply.

For another, no one loyalty program has the power to shape the hotel landscape—for good or bad. Yes, they play a functional role in communicating with, marketing to and retaining guests, but these programs cannot fundamentally shape pre-existing consumer booking patterns.

And as loyalty programs go, Expedia Rewards just isn’t that great of a deal for travelers. A guest who books hotel rooms only (as opposed to packages with flights, car rentals, etc., which yield greater rewards) earns only one point per dollar spent through the OTA. That guest would have to book $3,500 worth of hotel stays to redeem points for a … wait for it … US$25 hotel coupon. Hooray! (Sarcasm implied.)

My fellow editors at HotelNewsNow.com didn’t think Expedia’s announcement—nor any other loyalty program announcements—is worthy of general news coverage. Loyalty programs are loyalty programs are loyalty programs. I do, however, think it’s important to bring the issue to your attention for one simple reason: Expedia Rewards is just another in a litany of intermediaries that are wedging themselves between you and your customers. While you can’t stop Expedia and other OTAs in this pursuit, you can redouble your efforts to establish direct connections with your traveler base to retain most (if not all) of your room revenues.

By focusing on a memorable guest experience, you’ll be able to remind customers that they’re staying at your hotel—not Expedia’s.

HotelNewsNow.com staffer goes rogue!

… well, kind of.

First, allow me to introduce myself. My name is Patrick Mayock, and I’m the features editor at HotelNewsNow.com, the Web’s definitive providers of news and research for the global hotel industry.

You already might have encountered my blog postings, articles and other editorial content on the mothership. If you have – huzzah! If not – you’re missing out. (We’ve got some really great info over there, so please check it out.)

You might be asking yourself, ‘Why has this guy jumped ship to start his own blog?’ A word of clarification: I’m still happily employed at HotelNewsNow.com. I’m not using this blog to poach readers or cannibalize our existing audience base. This is simply an experiment in inbound marketing within the wild and wonderful Web.

So during the course of the next several weeks, this blog will host much of the same information that I’m continuously uploading to HotelNewsNow.com—plus some new surprises. (No hints.) I encourage you to check both sites, dive on in and interact to your heart’s content.

It’s going to be a fun ride.

Cheers,
Patrick