Posted on: Thursday, August 30, 2001

Room rates fall for first time in decade

Bloomberg News Service

NEW YORK — U.S hotel room revenue fell 6 percent in July, the fourth straight decline, and room rates fell for the first time in 10 years, as cutbacks in business travel hurt hotels in New York, San Francisco and Boston.

Revenue per available room, which measures average daily rates and occupancy, fell to $57.98 from $61.69 a year earlier, said Smith Travel Research. Average occupancy for all U.S. hotels fell 5 percent to 68.5 percent, while the average room rate fell 1.1 percent to $84.64, the Hendersonville, Tenn.-based firm said.

However, in Hawai'i, revenue per available room increased 0.74 percent in July from the previous year, to $131.35, according to a report released last week by the consulting firm PKF-Hawaii.

The average daily room rate in Hawai'i rose nearly 5 percent in July to $164.33 from $156.73 in July 2000. However, only 80 percent of the state's hotel rooms were filled in July, a drop of more than 3 percentage points from July 2000.

In New York, revenue per room fell 15 percent. It fell 22 percent in San Francisco and 20 percent in Boston. All three markets have been hurt by a falloff in travel spending by corporations.

"We're in the midst of a very severe downturn that goes beyond what we anticipated for the industry," said Randy Smith, Smith Travel's chief executive.

The results show travelers might be trading down to stay in less expensive hotels. Revenue per room for the luxury hotels, with an average daily rate of $136, fell 9.3 percent. At mid-priced hotels, with rates of about $71, revenue per room fell 4.7 percent.

Executives at several hotel companies said revenue per room at their properties will be lower than last year's for the rest of the year, and they're unsure when business travelers will return to hotels.