A. Trends in Number of Visitors
According to the Greater Boston Convention and Visitor’s Bureau, nearly 11 million visitors came to Boston in 1997. Over the course of the 1990’s, Boston has seen a steady increase in its annual number of visitors. (See table 1X.) Boston’s total of 11 million visitors last year represents roughly a 32% increase over the number of visitors to Boston in 1991.
[Table 1X (INSERT FIGURE 13 FROM PAGE 9, BRA REPORT)]
B. Market Segmentation
Boston’s hotel market is supported by four main groups of visitors: business visitors, convention and meeting attendees, tourists, and tour groups/airline contracts. (CREATE FOOTNOTE FOR BRA REPORT, P.9) The breakdown by percentage for each group of visitors is shown in table 2X.
[Table 2X (INSERT FIGURE 12 FROM PAGE 9, BRA REPORT)]
I. Business visitors
At 38% of the total, business visitors represent the largest fraction of Boston’s hotel customers. The economic strength of both the region and the nation helps support this market segment. Many visitors are drawn to Boston on business due to significant growth in the business and financial services industries, as well as the presence of Boston’s well known high technology companies. Business visitors tend to prefer downtown hotels because convenience, rather than cost, is their primary consideration.
II. Convention attendees
Boston’s second largest category of visitors comes from people who attend conventions and meetings in Boston. At 32% of the total, the size of this market segment is comparable to that of the business visitor market. Boston is a favorite location for conferences, because meetings held here generate a consistently higher level of attendance than those held in other cities. Like business travelers, convention participants prefer downtown hotels due to their proximity to convention facilities as well as to entertainment and dining locales. The higher cost of downtown hotels is offset by the ability of conferences to negotiate group rates. Booking large numbers of rooms in advance beneficial to the hotels as well, as demand for lodging generated by a single meeting can run anywhere from 500 to 4,500 rooms.
III. Tourists
Boston is a popular destination for tourists for many reasons, including its historic sites, its array of entertainment opportunities, its educational and cultural institutions, and its four distinct seasons. These visitors to Boston comprise just over one-fifth of the total hotel market.
IV. Tour groups/airline contracts
The remaining portion of Boston’s hotel market is represented by tour group and airline contract business. This market segment represents 9% of the total, divided roughly evenly between the two categories of visitors.
C. Variation in Demand
The occupancy rate of Boston’s hotels varies both throughout the week and over the course of the year according to market segment. For example, business visitors generally travel only in the middle of the week, whereas tourists tend to visit on weekends. Also, business-related room demand is fairly constant throughout the year, decreasing somewhat on holidays and during the summer, when tourist demand is at its peak.
The Boston hotel market experiences its highest demand in June through October. These months extend from the end of the school year, through summer vacation, and into the fall foliage season. In the “shoulder months” of April, May, and November, the level of demand is intermediate, whereas December, January, February, and March are the slowest months. (See figure 3X.)
[Figure 3X: INSERT FIGURE 14 FROM BRA REPORT, P.10]
Conventions are crucial to the Boston hotel market because they maintain a consistent, year-round level of demand. The predictable demand from conventions helps to supplement seasonal variations in demand from business and tourist visitors.
D. Strength of Boston’s Hotel Market
The strength of Boston’s hotel market can be assessed by three means: evaluation of trends in Boston’s market performance, comparison with the rest of Massachusetts, and comparison with other major U.S. cities.
I. Trends in Boston’s market performance
By all measures, Boston’s current hotel market is the strongest observed in the history of the city. As of 1996, the city’s hotels set record highs in terms of total number of rooms available (12,643), annual average occupancy rate (78.4%), and annual average room rate ($145.91). These sales represented a total of approximately 3.5 million room sale nights, corresponding to over $506 million in gross revenue. The current record-setting performance of Boston’s market fits in the context of a consistently rising trend over the previous six years. (See table 4X.) Between 1991 and 1996, the annual average occupancy rate increased 13% and the annual average occupancy rate increased by over $37.
[Table 4X: INSERT FIGURE 1 FROM BRA REPORT, P.2]
II. Comparison with rest of Massachusetts
The performance of Boston’s hotel market is the strongest of all the market areas in the entire state of Massachusetts. In 1996, Boston’s average occupancy rate and average room rate were higher than those of any other hotel market in the state. (See table 5X.) With the exception of Cambridge, Boston led most areas by a significant margin, with an occupancy rate 7.3% higher and an average room rate 15.7% higher than the state-wide averages.
[Table 5X: INSERT FIGURE 5 FROM BRA REPORT, P.5]
III. Comparison with other major U.S. cities
The recent performance of Boston’s hotel market places it in the top three markets among major U.S. cities, along with New York City and San Francisco. Between 1992 and 1996, Boston has ranked in the top three major cities in the nation in terms of average annual occupancy rate. In the same time period, Boston ranked second only to New York City in terms of average daily room rates. Table 6X summarizes Boston’s strong performance in comparison to other major U.S. cities in terms of both occupancy rate and room rates for the year 1996.
[Table 6X: INSERT FIGURE 4 FROM BRA REPORT]