Hotel Room Occupancy and Future Sales in Boston, Massachusetts

The tourism industry is among the most significant industries of the South Pacific. The tourism industry here in New Zealand includes both worldwide tourism and domestic tourism. Additionally it is an extremely important sector for the nation's recovery and growth from the global recession of recent years.

This research aims to study the effect of hotel development on the New Zealand economy (using the factors of favorable external social and economic effects, negative external impacts, social impacts and negative outside social influences ). These are then compared with the present tendencies and foreseen scenarios to establish the effect of future increases in the hotel industry. After this, a description of the primary factors which have affected the industry is given.

A description of the main factors which have affected the business is given in the context of past and future trends. Previously, increasing levels of tourism were strongly linked to increases in real estate values, as well as increased tax revenues from guests. Future projections indicate that future resort development will have little impact on the above-mentioned financial impacts. However, a few of the changes we have already observed may be dampening the consequences of future increases in property value and taxes.

The main factors of recent interest that have had the greatest impact on the sector include increases in the amount of hotel rooms, declines in the number of rooms in a building and increases in the cost of ownership of these properties. Both these factors have had a significant effect on the overall profitability of this business. The net effect of both combined has been a lower profit margin over the last twelve months compared to the same period in the preceding year, even though the six-month figures remain strong.

The reduction in the number of hotel rooms around the market has had a significantly negative effect on the supply side of the business. On the supply side, more units are not being sold, which could affect the profitability of each individual property. The reduction in the supply of hotel rooms also suggests that a greater number of prospective investors have the ability to obtain a share of these properties, which could reduce the profitability of the whole portfolio.

The decline in the number of rooms on the market has made a reduced number of billeted bedrooms, which have significant social impacts. As a result of a diminished billeted capacity, the average daily rate per area has risen by approximately seven percent in Boston. This growth in demand has resulted in the creation of more units that are either fully or partly occupied. The effect on earnings and occupancy is significant, with the majority of these newly occupied units expected to be occupied on an annual basis. Besides affecting revenue and the bottom line, the comparatively high rate of occupancy combined with reduced rates for new units has created a number of secondary effects, including lower property maintenance costs, an increase in the supply of short term bookings for new rooms, and a reduction in the volume of sales. The negative impact on the supply of billeted bedrooms will only lower the amount of active units on the market.

The gain in the number of vacant units on the market has had a corresponding negative effect on the quality of inventory on hand. This is particularly important for Boston hotels, as the biggest increases in stock have occurred recently as the active supply of units diminished. As the active supply of units increases, there is a higher probability of vacancies, a drop in quality of inventory, and an increase in prices for unused inventory. In short, a small increase in the supply of beds may lead to larger increases in the purchase price of unused inventory and reduced profits due to higher levels of vacancy and slower investment returns.

Beyond the direct impact on billeted bedrooms and the balance of active and vacant units on the property, the changes in the level of service one of Boston hotels has created a ripple effect on the level of quality of service expected from guests. Many resorts have discovered that after years of terrific success, guests have stopped patronizing their establishments and instead choose other regional competitors. If this trend continues, it could have a very detrimental effect on the profitability of any hospitality operation. The solution? Creating a culture of hospitality that clearly communicates to customers that they are welcome, valued, and the anticipation of exceptional service. The solution to improving customer experiences is a multi-pronged strategy that includes both general improvements to guest interaction and specific actions that target the root causes of why guests are not returning.