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The Honolulu Advertiser
Posted on: Wednesday, August 28, 2002

U.S. hotel recovery slows

Advertiser Staff and News Services

U.S. hotels will recover more slowly than expected after last year's recession and terrorist attacks, PricewaterhouseCoopers said, cutting its forecast of 2002 hotel room demand a second time in four months.

The accounting and consulting firm said revenue per available U.S. hotel room, a measure of average occupancy and room rate, will fall 2.3 percent, to $49.68, from $50.83 in 2001. In May the firm said revenue per room would fall 0.7 percent. Before that, it estimated room revenue would rise 3 percent from last year.

A "sharp decline" in the stock market indexes in July, weakening economic growth and the inconvenience of air travel are hurting demand for the lodging industry, PricewaterhouseCoopers said. The rate of recovery for the industry will be the slowest in the past 30 years.

"Lodging demand has taken between three and six quarters to recover from the trough and regain the previous peak in the past three industry cycles since 1973," the firm said in a report.

"PricewaterhouseCoopers now expects lodging demand to take eight quarters or from the fourth quarter of 2001 to the fourth quarter of 2003 (to recover)."

In a separate report yesterday on Hawai'i hotels, hospitality consulting firm PKF-Hawaii said that state-wide occupancy was down 3.3 percent last month compared to July 2001, with average daily room rates also continuing to lag.

The decrease was the first in two consecutive months of increases. Statewide average daily room rates dropped 2.1 percent from the same month a year ago — to $149.62 compared with $152.80.

The drops pushed hotels' revenue per available room — a key measure of hotels' profitability — 5.32 percent lower.

"Expectations of more lean months lie ahead as the possibility of war with Iraq enters the mix, the ongoing war on terrorism, the conflict in the Middle East and questions concerning the U.S. economy, particularly with the practices of corporate America and the stock market's spiral," said Daisy Aio, PKF-Hawaii's director of management and tourism consulting.

Nationally, the hotel industry last year suffered the worst drop in demand in 34 years because of the Sept. 11 attacks and decline in spending on business travel.

About 56 percent of corporate travel planners think it will be more than a year before business travel returns to "healthy" levels, the National Business Travel Association said earlier this year.

Revenue per room will increase 3.5 percent in 2003 and 5.6 percent in 2004, helped by more "robust" business travel spending, the firm predicted.

Hilton Hotels Corp. and Starwood Hotels & Resorts Worldwide Inc. both lowered their 2002 profit outlook when they reported their second-quarter results last month because of the weak business travel demand. Marriott International Inc. lowered its outlook for revenue per room.