BOULDER, Colorado—February is shaping up to be a great month in New Orleans, host to both the Super Bowl and Mardi Gras in the span of just a couple of weeks. Both events command high hotel rate premiums, and a simple Internet search yields several articles detailing—at least for the Super Bowl—motels charging rates 1,000% to 2,000% over normal pricing.
But are these just extreme examples of hopeful operators, or is this the norm for all properties? And which event—Mardi Gras or the Super Bowl—commands the greatest rate premiums for hotels?
STR Analytics, sister company of HotelNewsNow.com, analyzed the numbers to find the answers. To do this, we narrowed our analysis to two subsets of French Quarter/central business district hotels, clustered by chain scale:
Our analysis compares the rate premiums achieved at this year's Super Bowl to last year's Mardi Gras. (Mardi Gras performance for 2013 was not available at time of publication.) We compared the peak performance day surrounding each event (measured by competitive set average daily rate), and the premium was calculated as the percent increase of the same day-of-week average for the prior 12 months.
For example, if the peak ADR for an event was on a Saturday, we looked at the average of the prior year's worth of Saturday rates to understand normal Saturday pricing.
Our analysis begins with Hotel Set 1—those properties at the highest end of the market. The following image details the ADR and occupancy bandwidths for the days bracketing Mardi Gras 2012 for Hotel Set 1.
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The bandwidth depicts the range of both occupancy and rate for the highest and lowest daily performers of the selected comp set. As shown, at the weekend preceding the Tuesday of Mardi Gras, the occupancy band tightens toward the upper-90% occupancy range as rates peak.
How about the band for the Super Bowl?
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The bandwidth graph for the Super Bowl displays a much more distinct shift into higher rates and occupancy levels, with rate peaking the Saturday night before the game. Each property in the selected comp set seems to take advantage of special event pricing.
So which event commanded the highest rate premium?
In absolute terms, the Super Bowl was a clear winner for the luxury and upper-upscale properties in the selected comp set, commanding a peak rate nearly $200 higher than the peak rate commanded by Mardi Gras. Moreover, the Super Bowl commanded the highest rate premium, posting a peak increase of 204% over the average of the preceding 12-month's Saturdays. In turn, Mardi Gras commanded a 78% premium. On an individual-property basis, premiums ranged from 177% to 291% for the peak night of the Super Bowl event. Interestingly, in terms of multiples, the spread was much larger for Mardi Gras. While the peak performer increased rates 160% during Mardi Gras, the lowest premium was only 16%, indicating that, for at least one high-end property, pricing power was not significant for Mardi Gras.
Do the same trends hold true for lower-end properties? The following chart details the Mardi Gras bandwidth for Hotel Set 2, comprised of midscale, upper-midscale and upscale hotels.
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Like the higher-end hotels, the bandwidth for the midrate properties saw contraction around Mardi Gras, with occupancy tightening more than rate.
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The midrate hotels in the selected comp set also were able to take advantage of high demand during the days leading to the Super Bowl, with the Saturday before the game experiencing peak rate growth.
Similar to the higher-end hotels, the midrate set of selected hotels experienced rate premiums of nearly 200% normal rates for the same day-of-week for the peak night of the Super Bowl. In terms of absolute rate, the Super Bowl was still the clear winner, though the premium over Mardi Gras was about $80 lower in Hotel Set 2 than in the higher-tiered Hotel Set 1.
Most interestingly, the properties in Hotel Set 2 achieved an actual higher overall average rate during the Mardi Gras peak than the higher-tiered Set 1: $274 versus $265. These are generally lower-priced properties; their smaller size and location closer to the French Quarter allowed them to take greater advantage of Mardi Gras than their more upscale peers.
It stands to reason the Super Bowl commands a greater premium than Mardi Gras. Mardi Gras is a recurring annual event in New Orleans, and it's likely the average reveler is younger and less apt to have the amount of disposable income a Super Bowl attendee would have. Moreover, the Super Bowl draws demand from all over the world but can only accommodate a fixed number of seats—a perfect recipe for hotels to take advantage of premium pricing.