Posted: January 27, 2012

The occupancy rates for Norfolk's and Virginia Beach's hotels are creeping back up toward pre-recession levels, and in 2011, Virginia Beach hotels saw their highest revenues per available room in five years.

Figures show that Norfolk's occupancy rate rose to 57.3 percent in 2011, up from 55.5 percent in 2009 and 56 percent in 2010. In 2007, occupancy rates were 63 percent, the highest over a 10-year period.

"You are not back to where you were, but it's definitely the highest it's been since the downturn," said Bobby Bowers, senior vice president of Smith Travel Research, which provided the numbers.

In Virginia Beach, the occupancy rate rose from 57.5 percent to 59.7 percent. Pre-recession, in 2007, the occupancy rate was 62.4 percent.

Last year, Virginia Beach revenue topped out at more than $262 million, beating annual revenue figures from 2008 to 2010, as well as 2007, when revenue only reached $249.6 million for the year.

In Virginia Beach, RevPar, a measurement of revenue per available room, also was at its highest in 2011 over the five-year period, at $64.89 per room. The second highest RevPar figures came in 2007, before the economy tanked, at $64.41.

A healthy occupancy rate is relative, Bowers said. While hoteliers might appreciate a 50 or 60 percent occupancy, "if you look at occupancy, and it's 50 percent, half of your capacity is going unused," Bowers said.

The national average occupancy rate is about 60 percent, Bowers said.

The increases come as both Nofolk and Virginia Beach are debating the prospect of new hotels.

Developers are proposing hotel projects to revive downtown Norfolk's Waterside Festival Marketplace.

Linda Markert, who until earlier this month was president of the Norfolk Hotel & Motel Association and remains on its board, said the association supports the concept of a new hotel at Waterside, "but we have not seen all the details and we have not seen the other proposals yet."

In Virginia Beach, there is still some concern from the public about a large investment, on the city's part, in a headquarters hotel near the Virginia Beach Convention Center.

Earlier this month, Virginia Beach Mayor Will Sessoms canceled a public hearing and city council vote on a headquarters hotel proposal for a 15-story Hyatt Regency, which would have cost the city $61.8 million.

The cost for the city, along with the threat of competition with existing hotels at the Oceanfront, alarmed the community. The entire cost of the project was $109.2 million.

Andy Vakos, part owner of The Oceanfront Inn at 2901 Atlantic Ave., questioned whether the hotel market could handle a development of the magnitude of a headquarters hotel.

"The market has been steady, and it has been going up," Vakos said. "But I'm not really sure if the area could handle a big facility with all the competing venues like that we have in a small drive."

Vakos said a private developer should take on the burden of the cost.

"I feel if there was a need for it, the private sector would come in and build it," he said.

The Williamsburg hotel market hasn't fared nearly as well as Norfolk and Virginia Beach.

Occupancy rates in Williamsburg are just 40.9 percent, and RevPar there is $35.

"Something needs to happen with Wililamsburg," said Vinod Agarwal, an ODU professor of economics. "They need to market themselves better." nib

By Bill Cresenzo and Danielle Walker

bill.cresenzo@insidebiz.com