Business travelers filling Philadelphia hotels back up

Business travelers, the kind who fill hotel rooms and airplanes midweek and don't mind paying full price, have returned in a big way, an unofficial leading indicator of improving economic times.

Hotel operators in major cities across the United States say they are seeing a significant increase in the numbers from a year ago.

"You can see it in our lobby after 5 p.m. It's teeming with corporate types after they get out of meetings," said Paul Schwartz, general manager of the Sheraton Philadelphia City Center Hotel at 17th and Race Streets.

The business traveler is, indeed, on the move again, said C. Patrick Scholes, senior lodging analyst for FBR Capital Markets & Co. Inc., which tracks the hotel industry.

"We attribute the upsurge to increased confidence from companies that business activity is coming back," Scholes said.

And at an investor conference in New York last week, U.S. airline executives attributed a rise in passenger revenue, in part, to increased corporate travel, with trends positive going forward.

In highlighting his company's improving outlook, Continental Airlines Inc. chief executive Jeffery Smisek said, "I think there is a broad-based recovery. Business travel has been slow to return, but it is returning now."

Economists say the resurgence of this coveted group of travelers, known in hotel parlance as transient business or IBTs (individual business travelers), signals another step up from the depths of the recession.

"Travel is one of the first things businesses cut in recessions - and resume in economic recoveries," said Mark Zandi, chief economist and cofounder of Moody's Economy.com in West Chester.

As Joel L. Naroff, of Naroff Economic Advisors in Holland, Bucks County, sees it, "Improving corporate travel is a sign that businesses believe it is finally worth the cost to send their people out looking for sales. That points to growing demand for goods and services and a greater willingness to spend money."

"Since firms have been ultracautious in the expense controls," Naroff said, "the increase in corporate travel is really a positive indication that firms are now looking forward with hope rather than fear."

So many IBTs stay at his hotel these days that Schwartz added two computers to the Sheraton City Center's business center last week, for a total of six.

This week, he said, the hotel is booked solid Tuesday, Wednesday, and Thursday, thanks largely to business travelers.

"And they are all short-term bookings" - rather than those made months in advance - "which is unheard of," Schwartz said.

Mike Fitzgerald, corporate accounts manager for an Atlanta manufacturer of medical-disposal products, was staying at the Courtyard by Marriott near City Hall last week. He said he was being sent out of town on business more this year.

"We're definitely getting a better response from customers for our products," Fitzgerald, who works in Memphis, said while going over sales data on a laptop computer with his supervisor, Rob Maichin.

For the U.S. lodging industry, which has been on its knees the last two years, corporate travel's resurrection is critical.

Businesspeople booking rooms in the middle of the week tend to be more profitable for hotels than leisure guests, many of whom take advantage of discounted rates on the weekend.

Specifically, hoteliers say, individual business travelers pay more for rooms because they have to be in a certain location for meetings and have shorter booking windows that result in their having to pay a premium.

Also, their stays are typically covered by company expense accounts - as are their meals at the hotels' restaurants, their drinks at the bar, their Internet use, their parking, and their dry-cleaning.

"There's more residual types of dollars to be had" from an IBT, said the Sheraton's Schwartz.

Center City hotel managers say the turnaround in corporate travel has been faster and more robust than they expected. In May, occupancy and revenue per available room were up 8.3 percent and 5.8 percent.

"The summer travel season has not kicked in yet, but we're definitely seeing an uptick in business for sure on all ends," said Bill Fitzgerald, general manager of the Doubletree Hotel Philadelphia, where the segment showing the greatest growth was the IBT. "We're feeling pretty good.

"It tells me things are starting to shake loose, meetings are taking place, and people are starting to travel again, and that's helping occupancies."

In 2008, individual commercial and government travelers accounted for 787,000 occupied rooms in Center City, according to PKF Consulting, which tracks this region's hospitality industry. In 2009, the number dropped slightly, to about 780,000.

For the first four months of 2010, the hotels reported a combined demand from those two segments of 277,000 occupied rooms, compared with 251,000 for the same period in 2009 - an increase of 10 percent despite the February snowstorms.

At the 581-room Loews Philadelphia Hotel, local corporate accounts and IBT bookings were up 20 percent over last year. At the Hyatt Regency Philadelphia at Penn's Landing, IBT bookings were up 25 percent, or 1,100 room nights.

A year ago, the Sheraton Philadelphia City Center was booking, on average, 100 to 200 rooms a night in transient business, forcing Schwartz to go after mainly group business travelers (a block of 10 or more rooms) to fill his 759-room hotel.

This year, that has reversed, he said. IBTs have more than doubled, to 300 to 400 rooms a night, pushing revenue up more than $400,000 in May over the same month last year. The increase in demand has enabled him to charge higher rates.

In general, demand for rooms drives rates.

With the current bump in occupancy and revenue per available room, hoteliers say, prices likely will get higher.

Transient-business room nights so far this year at the Philadelphia Marriott Downtown, which is connected to the Convention Center, are up 3,400 rooms from a year ago, general manager Bill Walsh said. He has increased his corporate rate slightly, up $1.50 to $1.75 a night.

"Maybe it's just time for people to go out and start meeting customers again," Walsh said.

People like Mary Margaret Bartik, who flew in from Minneapolis to stay at the Sheraton City Center on Wednesday.

Bartik, director of research and development for a biotech firm in Bloomington, Minn., said her travel schedule had picked up considerably from 2009: "I didn't go to any meetings at all last year. No one traveled in my industry."

Now, she said, she is seeing a lot of colleagues she had not seen in a while, at events such as last week's World Pharma Congress here.

"It's time to make investments in our business again, and to network and make new contacts," she said.

Salesman Alan Tepper, with nearly a dozen retailers to meet in eastern Pennsylvania last week, booked a room at the Sheraton City Center for Tuesday and Wednesday four days before his arrival.

Tepper is a partner at the Wolf Group, a sales agency in Potomac, Md., that represents furniture, lighting, and ceiling-fan manufacturers. Sales are up, he said - he was staying at the hotel for the second week in a row, up from once a month.

"My dealers are reacting to increased confidence in the marketplace," he said. "People are starting to buy things."