Sluggish hotel demand outside the largest U.S. cities is slowing an industrywide rebound even as an influx of leisure, business and international travelers spurs growth in metropolitan areas such as New York.



Occupancies at hotels in small towns and near highways were little changed at 49 percent in the first six months of 2010, according to Smith Travel Research. They climbed to 65 percent from 61 percent from a year earlier in large cities including New York, Chicago and Washington.



Lodging demand in smaller markets has been slower to recover as the job market remains weak. While rising travel to urban areas boosted earnings at hotel owners including Marriott International and Wyndham Worldwide, companies may not be able to raise rates nationwide until the second half of 2011, according to Jan Freitag, vice president at Smith Travel.



The Buffalo hotel market has enjoyed occupancy rates above the national average, though far short of those found in major cities, according to Smith Travel Report statistics provided by the Buffalo Niagara Convention and Visitors Bureau.



In downtown Buffalo, hotel occupancy for the first five months of the year was put at 57.4 percent, compared to 53.9 percent for the same period a year ago. Across Erie County, hotel occupancy for the period was 55.7 percent, about the same as the year before.



CVB chief Dottie Gallagher-Cohen said the higher occupancy rate was even better than it might appear, as the number of available rooms had also increased. Figures also showed an increase in the revenue per room downtown, from $50.98 last year to $55.60 in 2010.



She said the growth was due to several factors, including the addition of the Embassy Suites hotel in the new Avant building downtown and extensive remodeling of the downtown Hyatt.



"The hotel property stock has gotten better, dramatically better, downtown," she said.



The last year also saw some major draws for out-of-town visitors, including the NCAA basketball tournament and the National Buffalo Garden Festival.



"We're feeling a sense of momentum," Gallagher-Cohen said, adding that she expects the World Junior Hockey Tournament to fill up hotel rooms during the holiday season, a time when local hotels often see little demand.



Total hotel occupancies in the U.S. rose to 56 percent this year through June from 54 percent a year earlier, Smith Travel said. In New York City, occupancies climbed to 79 percent from 72 percent, placing it first among the top 25 U.S. markets.



New York City's 514 hotels account for only 1.9 percent of the total U.S. room supply, and their revenue share is almost 6 percent, Freitag said. The U.S. average decline in room rates was 2 percent this year through June. Excluding New York hotels, the drop was 2.7 percent.



Rates in New York have been climbing since March, after almost 11/2 years of declines, amid higher demand from business and leisure travelers, according to Freitag.



Revenue per available room, or revpar, was little changed in the first half of the year at hotels in smaller towns, where it averaged $37.91, and at hotels near highways, where it averaged $33.74. That compares with a revpar increase of 6.9 percent to $87.52 in urban areas, the biggest gain among Smith Travel's six regional categories.



Companies will need to gain confidence in a broad economic recovery before they hire more workers or spend money to send them on business trips outside big cities, said Loeb of Robert W. Baird.



"The financial services industry is doing better, so that boosts travel to places like New York," he said. "Manufacturing and agriculture or businesses that service the middle markets in America, on the other hand, aren't doing that well. That's what's affecting the smaller markets."

 

News business reporter George Pyle contributed to this report.null