Posted on: Saturday, May 12, 2001

Hotel revenue in U.S. expected to improve

Bloomberg News Service

NEW YORK — U.S. hotel revenue growth will rebound in 2002 after the economy picks up steam later this year, according to a report by PricewaterhouseCoopers' hospitality group.

Growth in revenue per room, a measure of demand in the industry, will rise to 4.3 percent in 2002 from 2.8 percent this year, the firm said. An improved U.S. economy and limited construction of new hotels will allow hotel operators to fill rooms and boost rates, the firm said.

The 2.8 percent growth rate this year would be the slowest since 1992. In 2002, average daily rates are expected to increase 3.9 percent to $91.90, while average occupancy will rise to 63.2 percent from 62.9 percent, the firm said.

With U.S. economic growth at 2 percent in the first quarter, half the average of the last four years, companies have cut back on business travel spending. As a result, hoteliers including Starwood Hotels & Resorts Worldwide Inc. and Marriott International Inc. have reduced their profit growth estimates for this year.

Government reports that April retail sales rose more than expected and consumer confidence is improving are seen as signs that the economy may rebound.

Morgan Stanley Dean Witter & Co. analyst Mike Happel upgraded shares of both Starwood and hotel owner Host Marriott Inc. this week, saying that hoteliers are primed to hit a "sweet spot" in 2002 when demand increases. Happel also said the lack of new supply would work in hotel companies' favor.