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OCCUPANCY AND ROOM RATES

“Healthy demand is certainly here in Florida,” Baldwin said. “We like to joke that heads are
being put in beds in Central Florida.”
At the same time, she added, the number of vacant rooms got smaller last year.

“Demand is back – that’s the biggest thing, and supply is not, which is a great thing,” she said.

But Baldwin, the director of business development and destinations at Smith Travel Research,
said there’s only one dark cloud over the entire horizon for the hotel and lodging industry: room
rates. They fell so dramatically at the start of the recession in 2008, she said, that resorts have
been fearful of raising them – and have even lost some bargaining power because those rates had
fallen so sharply.

“Pricing power is coming back, but right now we’re still playing catch up,” she said.

This afternoon, the Central Florida Hotel and Lodging Association held its annual general
membership luncheon, held at the Hilton Orlando Bonnet Creek Resort in Lake Buena Vista.
This is the world’s largest regional hospitality association, representing about 80 percent of
the hotels in Orange, Osceola and Seminole counties, as well as many of the region’s resorts,
timeshares, and vacation homes.

During the luncheon, Smith Travel Research made a presentation, “Orlando Hotel Occupancy
and Projections,” which looked back at occupancy and room rates in 2011, while also making
projections about where the industry was headed in the rest of 2012.

Baldwin, who gave the power point presentation, said the local hospitality industry rebounded
nicely in 2011, as pent up demand for a vacation in Central Florida helped fill up the local hotel
rooms that had gone vacant at the height of the recession in 2008 and 2009.

“We set records for 2011,” she said.

She noted that RevPAR -- or revenue per available room, a performance metric in the hospitality
industry – was up in 194 of 212 American tourist markets, including Orlando, last year, as well
as worldwide.

“Globally, we are seeing strong improvements in RevPAR,” she said. “This industry is extremely
important and extremely profitable, even when coming out of a downturn. Folks are getting back
on the road. We are seeing the strongest demand rebound ever.”

The same is true locally. In 2011, Orange County collected more than $177 million in resort
taxes, or taxes collected on sales from room stays. That broke records and was higher than
the last profitable year for the local industry, in 2007, the last year before the downturn, when
Orange County collected $165.8 million in resort taxes.

Leading the way, she said, have been luxury hotels, resorts, and timeshares, which have been
outperforming upscale, midscale and economy hotels – although all categories of lodging
experienced strong improvements in 2011, she added.

“We’re seeing some strong occupancy across the board,” Baldwin said. “We’re really hoping
luxury will be the engine that leads the way in the next couple of years. We’re seeing all the
money being made in the luxury segment.”

But if there’s one problem that the industry still has, it’s what they’re charging customers. While
occupancy is back up strongly, guests are still paying less than they did before the recession
started in 2008, Baldwin said.

“During the downturn, rates went down pretty dramatically,” she said. “Hoteliers panicked and it
will take a while to get the rates back up.”

In some instances, she said, resorts agreed to book six months in advances at rock bottom prices
– a move that might have made sense at the time, Baldwin said, but has since chipped away at
their bargaining power, since customers have come to expect those low rates to stay in place.

“That’s what we’re seeing now, the effect the downturn had on pricing and how it’s haunting the
market today,” she said.

When resorts can expect to begin raising rates, she added, isn’t clear.

“Will it take seven years to get back up to those (pre-recession) rates? We don’t know,” Baldwin
said. “That will be up to the hoteliers.”

But she added that Florida cities like Orlando and Miami are still expected to see a strong year in
2012 as far as tourism, and getting people into the local rooms.

“Really, we’re seeing some nice, positive things happening for Florida’s areas,” she said.



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