Hoteliers See Boom Through 2007

Most hotel executives and investors expect healthy occupancy and revenue levels to continue through 2007, according to a survey of more than 170 hospitality executives, investors and real estate professionals attending the New York University 27th Annual International Hospitality Industry Investment Conference held in New York this week.

Optimism dominated the conference and survey results reflected the extent of continued expectations: 54 percent said the market will sustain occupancy and revenue levels through 2007, and 20 percent expect the momentum to continue through 2008.

"The business customer has come back," Carlson Hospitality Worldwide president and CEO Curtis Nelson told conference attendees.

Just over half of survey respondents cited the business travel rebound, while 27 percent cited pent-up demand as the primary factors for a "faster than anticipated recovery of the U.S. hotel industry back to 2000 levels."

Hoteliers have reason to be sanguine, according to PricewaterhouseCoopers projections released this week that point toward strong occupancy, record high room rates, revenue per available room growth and growing profits-in 2005 and beyond.

"PricewaterhouseCoopers forecasts industry profits to reach $20.8 billion in 2005, the highest level since 2000, and only $1.7 billion below the record set in 2000," the PwC report said. "In 2006, profits are expected to reach a new record high of almost $25 billion."

Citing the midyear projections. Bjorn Hanson, head of PwC's hospitality and leisure practice, during a presentation said occupancy rates this year will average 63.4 percent, which would mark a year-over-year increase of 3.3 percent and bring occupancy to its highest level since 1997. PwC expects the trend to continue through 2007, growing to 64.5 percent and 64.9 percent, respectively in 2006 and 2007. RevPAR, meanwhile, is expected to jump 7.8 percent this year, yielding stronger profits than anticipated.

Yet, the good news for the lodging industry most assuredly will translate into bad news for buyers: PwC is slating record high room rates at $89.97 this year. "At a growth rate of 4.3 percent, this is the strongest increase since 2000, when the rate was 5.4 percent."