Hotel Revenue Hovers

Nationwide, the hotel industry was down by 8 percent for the first six months of 2002.

But Northwest Arkansas fared considerably better than that.

When compared with the first six months of 2001, the cities in Benton County had an increase in hotel revenue — up by 2.7 percent in Bentonville and 3.3 percent in Rogers. (See graphic, Page 19)

In Washington County, hotel revenue decreased for the six-month period in the two largest cities, but only slightly. Revenue dropped by 1.3 percent in Fayetteville and 0.6 percent in Springdale.

“[Compared] to last year, we’re only down a little bit, about $50,000,” said Kevin White, general manager of the Holiday Inn Northwest Arkansas in Springdale, the area’s leading hotel in revenue with $4.26 million last year. “When Wal-Mart does well, I think the rest of the cities do well.”

The world’s largest company, Wal-Mart Stores Inc., is probably the main reason for the hotel revenue increase in Benton County.

Vendors travel regularly to Bentonville to call on Wal-Mart’s corporate headquarters, and many of those vendors stay during the week at area hotels before flying home on Fridays.

Airport alters market

In October 1998, the Northwest Arkansas Regional Airport opened in Highfill, about 15 minutes from Wal-Mart’s headquarters. That meant vendors no longer had to fly into Fayetteville’s Drake Field and drive 35 miles to Bentonville. It also meant they were no longer staying in Fayetteville hotels.

“Losing the airport was the key thing,” said Bill Clodfelter, district manager of the 197-room Clarion Inn in Fayetteville and the 103-room Clarion in Bentonville. “[The occupancy rate] has gone down [at the Fayetteville Clarion] about 20 percent since the airport left.”

Clodfelter, who also owns the Fayetteville Clarion, said some of those guests are probably staying at the Bentonville Clarion instead, but others have defected to other hotels.

Clodfelter said the Fayetteville Clarion’s occupancy rate peaked at about 75 percent in 1992. The year after the airport opened, the rate had dropped to about 65 percent. This year, it’s at 52 percent. With that drop in occupancy, the Fayetteville Clarion has had a 10 percent dip in revenue in the four years since the airport opened, he said.

The Fayetteville Clarion still is bringing in more money — $3.4 million in 2001 compared with $2.4 million for the Bentonville Clarion, according to city tax records — but it’s working harder to do it. The Fayetteville Clarion has about twice as many rooms as the one in Bentonville, but Clodfelter is getting about half as much money per room in Fayetteville — about $60 per night, compared to $120 per night in Bentonville.

The Bentonville Clarion and adjacent Sleep Inn are both owned by Hobbs & Curry FLP of Fort Smith. Hobbs & Curry plan to expand the 60-room Sleep Inn, adding another 40 rooms, a courtyard and an outdoor swimming pool. The Bentonville Clarion and Sleep Inn are part of a “complex” that includes the city’s convention center, Clodfelter said.

When the new airport opened, hotel growth stopped in Fayetteville and boomed in Benton County.

Three new hotels opened in the area since June 2001 — two in Rogers and one in Springdale. We excluded revenue from those hotels in our calculations on Page 1 and in the graphic on Page 19 to get an apples-to-apples comparison and to see if September 11 affected the hotel business here. That’s also the reason we examined revenue based on the first six months of this year instead of using our annual list (see Page 27), which shows a comparison of calendar year 2001 with 2000.

From the sales numbers, it appears that the terrorist attacks had little effect on the area’s hotels. During a recession, people still need the staples of life, such as groceries and laundry detergent, and Wal-Mart has made a $218 billion-a-year business by selling those items at an “everyday low price.” So vendors are still visiting Wal-Mart and staying in Northwest Arkansas hotels.

Lately, the Fayetteville hotel market has begun to show signs of renewed life. A new Country Inn & Suites is under construction on Wedington Drive, and construction is to begin soon on a new Courtyard by Marriott (Please see story on Page 25.) The $12 million renovation of the downtown Mountain Inn, however, is still on hold.

“Fayetteville slowed down on its growth because the business slowed down,” Clodfelter said. “[Benton County] is going to reach the limit … They’ll eventually overbuild that market. It’s close now. Fayetteville is overbuilt. But Fayetteville will remain strong because of the university. You just get a smaller piece of the pie.”

Recession rebound

Although most people think it happened the other way around, according to revisions by the Commerce Department’s Bureau of Economic Analysis, the United States was in a recession by the second quarter of 2001, almost three months before September 11.

Growth in the nation’s gross domestic product declined through the first three quarters of 2001. The most widely accepted definition of a recession is two consecutive quarters of negative GDP growth.

According to an article in the Aug. 1 issue of the Wall Street Journal, the total loss of output from last year’s economic slowdown was 0.6 percent, which tied it for the second-mildest recession since 1955.

Oddly enough, GDP growth has increased regularly since then — by 2.7 percent in the fourth quarter of 2001, 5 percent in the first quarter of 2002 and 1.1 percent in the second quarter of this year.

But many economists fear another dip in the road to recovery, especially with the sharp decline in second-quarter GDP.

What does this mean for the hotel industry? It could mean more business.

The problems with the U.S. economy have resulted in a months-long decline of the value of the dollar, making it cheaper for foreigners to vacation here.

At the same time, the weak dollar and fears of terrorism abroad mean more Americans will vacation at home, according to a July report by investment firm Bear Stearns Cos.

We’re not likely to have too many foreigners vacationing in Northwest Arkansas, but it will also be cheaper for companies in other parts of the world to send representatives to the headquarters of Wal-Mart or Tyson Foods Inc. in Springdale.

Of course, they could save a little more money by staying at the Fayetteville Clarion and driving to Bentonville.