HENDERSONVILLE, Tennessee—Cincinnati’s central location and affordable room rates offer great value to business and leisure travelers alike. With 250 hotels that have just under 28,000 rooms, Cincinnati ranks as the 39th largest U.S. market based on room supply and number 44 based on annual room revenue. In the 12 months ending January 2010, Cincinnati hotels generated US$417 million in room revenue, edging Columbus for the number one spot in Ohio.
Cincinnati has been hit hard in the current cycle, but appears to be slowly climbing back. Annual occupancy in the market has been flat or down since 2006. January 2010’s 1.6-percent occupancy increase was the first monthly occupancy gain the market has experienced in 19 months. In the latest three months ending in January, occupancy was down 1.7 percent—solid improvement over the 12-month performance. Unfortunately, average daily rate has not shown the same rate of improvement and remains down 4.7 percent in the most recent quarter. Revenue per available room has been down for 16 consecutive months, but the declines are slowing and January’s 1.4 percent decrease was the best the market has experienced since October 2008.
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Cincinnati’s weekday performance has been much harder hit than weekends. Weekday occupancy declined 9.2 percent versus a drop of 3.1 percent on weekends. Weekday room rates also took a much harder hit, down 5.8 percent versus a 3.6 percent weekend decline. The combination pushed weekday RevPAR down 14.4 percent, while weekend RevPAR fell 6.6 percent.
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New room-supply growth has contributed to some of the recent headwinds in the market. The latest 12-month supply growth was 1.9 percent, versus the long term average of 2.4 percent. There are currently 344 hotel rooms under construction in Cincinnati—about 1.2 percent of existing supply. These numbers suggest that supply additions will present a diminishing problem for hotel operators in 2010 and 2011.
About half of Cincinnati’s room revenue is generated by luxury, upper upscale and upscale hotels, with another 21 percent coming from midscale-without-food-and-beverage properties. Based on room revenue, the Cincinnati Northeast sub-market is the smallest, generating US$58 million in room revenue in latest 12 month period. The other three sub-markets are fairly similar in size. The Airport/South sub-market has been hit the hardest by far, based on the most recent 12-month performance. RevPAR declined 16.2 percent, driven primarily by an occupancy drop of 10.3 percent.
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Cincinnati’s 12-month performance compares favorably with selected competitive markets. Only Lexington, Kentucky, had better RevPAR performance (-9.1 percent versus -12.2 percent). Cincinnati’s ADR decline of 5.2 percent was the “best” of the selected competitive markets—barely edging Lexington’s 5.3 percent drop. Cincinnati’s occupancy decline of 7.4 percent was similar to Indianapolis, Indiana, and Louisville, Kentucky, for the same period.
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Looking forward, Cincinnati would appear to be the type of market that could benefit from the “less is more” thinking of today’s traveling public. The market offers business travelers a lower profile, cost effective destination for corporate meetings and conventions. Easy access, central location, good value and varied activities also make it an attractive leisure destination. The Great American Tower at Queen City Square is scheduled to open in the first quarter of 2011. The complex will offer 1 million square feet of office space and 20,000 square feet of retail, which could contribute to new hotel demand growth. Hopefully, Cincinnati hotel operators can capitalize on the market’s position and new development projects to increase business while climbing back from a very challenging period.
Bobby Bowers is senior vice president, operations for STR. He is based in Hendersonville, Tennessee.