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Travel, hospitality industry enjoyed robust growth in 2012

Sector is ‘holding up San Diego’s economy’

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While the U.S. economy continues its anemic recovery, the travel and hospitality industry has enjoyed more robust growth. In San Diego, the sector continued to show modest improvement in the second half of 2012, but industry experts anticipate slower growth in 2013.

In the national picture, the travel industry created jobs for the 12th consecutive month in November, according to the U.S. Travel Association’s analysis of the Department of Labor’s latest jobs report. The travel industry has added jobs at a 17 percent faster pace than the rest of the economy, and has recovered 61 percent of the jobs lost during the recession, compared to 52 percent in the rest of the economy.

Hotels saw a rise in occupancy, average daily rate and revenue per available room, according to Smith Travel Research. Occupancy rose by 2.3 percent, to 61.3 percent. The average daily rate rose 4.3 percent to $106.17, while revPAR, a performance metric calculated by multiplying a hotel’s average daily rate by its occupancy rate, jumped 6.6 percent to $65.08.

"The data indicates 2012 will finish as a solid year for the U.S. hotel industry," said Amanda Hite, Smith Travel Research president. "The industry has experienced back-to-back years of record demand, which, coupled with limited supply growth, has fueled the increases in the other measurement categories. It’s been near ideal conditions for the industry to finally put the recession in the rearview mirror."

The San Diego hospitality industry also enjoyed a strong year. In the most recent data by Tourism Economics prepared for the San Diego Convention and Visitors Bureau, visits to the city grew 5 percent in the third quarter, reaching 10.5 million visitors. Full-year visitor growth is expected to average 3.6 percent for 2012.

Visitors to San Diego also stayed longer and spent more money while they were here. Visitor expenditures increased 8.3 percent in the third quarter, and spending is expected to surpass the 2008 peak in nominal terms.

While hotel demand increased just 1.5 percent in the third quarter, occupancy rose to 79.7 percent. The average daily rate has yet to recover to pre-recession levels, but ADR jumped 5.9 percent to more than $144 in the quarter. And RevPAR grew 7.2 percent, nearly recovering to the 2008 peak.

"The second and third quarters were very strong. We had strong occupancy growth and average rate growth,” said Robert Rauch, president of RA Rauch & Associates. “We’re on pace to finish the year at 71 percent occupancy at a daily rate of $122. That’s close to the peak years during the strongest recent period of ’05 to ‘07… The economy has slowed, but the industry has not.”

Rauch, a local hotelier and hospitality veteran, cited a number of reasons for the growth, including the strong labor force, international visitation and convention center business.

“We are holding up San Diego’s economy right now,” he said of the hospitality sector, which is the third largest industry in the county. “We’re the strong labor force, and we’ve grown more jobs than any other industry.”

The national economy will continue to benefit from the travel industry, and the industry will benefit from President Barack Obama’s support, Rauch added. An Obama initiative has accelerated the visa process for travelers from China and Brazil, and the president’s visa waiver program allows low-risk travelers to stay in the United States for up to 90 days without a visa.

Leisure demand from abroad will continue to bolster the travel industry in San Diego into 2013 and beyond, agreed Joe Terzi, president and CEO of the San Diego Convention and Visitors Bureau.

Last year, British Airways launched daily nonstop service from San Diego to London, and Japan Airlines began nonstop flights from Tokyo to San Diego on Dec. 2.

“We’re seeing pretty strong growth in international traffic. That’s really directly attributed to the fact that we now have direct service,” said Terzi.

The San Diego Convention Center hosted 64 conventions in 2012, compared to 74 in 2011. Estimated attendance was more than 574,000 in 2012, compared to more than 566,000 in 2011. This year’s bookings were expected to contribute some $654 million in direct attendee spending, with an economic impact in the region of more than $1.57 billion.

“The future is very bright, assuming we’re going to get the convention center expansion moving forward — in 2016 sometime, which is the latest forecast,” Terzi said. “We have a significant number of new accounts and large annual citywide conventions that are looking forward to booking, but they need the additional space to do that.”

Once the convention center can start booking the expanded facility, Terzi said he expects the uptick in convention attendees to lead to a substantial increase in the total number of room nights booked.

“Annually, the amount of room nights booked have been somewhere around 900,000. We think that number, with the new space, could go up to as much as 1.3 million,” he said.

Attendance at local attractions also has been up in 2012, Terzi said, with a significant increase in the latter half of the year. Summer and fall months were strong, and October saw particularly high attendance due to a marketing campaign offering free admission to children at 36 area museums and a month-long spotlight on arts and cultural activities throughout the region.

“All in all, 2012 was a good year,” Terzi said. “2011 was a strong year, 2012 was a little better; 2013, we’re just not sure about the economic issues right now … It’s potentially a little bit of a depressive impact on the market because of the uncertainty. We’re hoping some of these issues will be resolved — consumer confidence will start to rebound a little bit, and we’ll get back to a stronger travel market.”

-Klam is a San Diego-based freelance writer.

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