Weak hotel demand in smaller cities is slowing the U.S. hotel industry’s rebound, and hotels in smaller markets likely won’t be able to start raising rates before the summer of 2011.   That’s good news if you travel to places like Bakersfield, Calif., or Allentown, Penn., and not-so-good news if you own or operate hotels in such cities.  It’s also just one of the interesting findings contained in Bloomberg’s story based primarily on industry tracker Smith Travel Research data and interviews. Some key highlights:

• Occupancies at hotels in small towns and near highways stayed essentially flat at 49% in the first six months of 2010. In contrast, occupancies rose to 65% up from 61% a year ago in big cities such as New York, Chicago and Washington.
• Hotel companies such as Marriott and Wyndham have reported stronger financial results for hotels that tend to be in big cities.  New York City hotel rates have been climbing since March, after almost a year and a half of declines.
• New York’s hotels filled 79% of rooms during the period, vs. 56% for the U.S. overall.  It’s worth noting what a critical role New York City – where a business travel rebound has been visible for months – plays in U.S. hotel performance stats.
• The 514 hotels in New York City account for just 1.9% of total U.S. room supply – and yet their revenue share is nearly 6%, Smith Travel Research exec Jan Freitag tells Bloomberg. When you exclude New York’s hotels, the average U.S. hotel rate dropped by 2.7%; when you include them it dropped by 2%.

“New York City is skewing the numbers,” David Loeb, an analyst at Robert W. Baird & Co. in Milwaukee tells Bloomberg. “Urban and suburban markets are doing the best while the others are recovering more slowly.”  The split outlook is being driven by broader trends in the U.S. economy.  ”The financial services industry is doing better, so that boosts travel to places like New York,” Loeb also says. “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.”  Click here for full report from USA Today…