STR Downgrades 2009 Hotel Forecast, But Sees Some Recovery

Smith Travel Research today revised its 2009 U.S. hotel industry forecast to project a 9.8 percent year-over-year decline in revenue per available room, a much deeper drop than its late October 2008 projection of 2.5 percent, though it said some recovery also is likely in the second half of the year.

For the full year, Smith Travel Research is forecasting 2009 occupancy to be 56.5 percent, down 6.5 percent from 2008 levels. The forecast for average daily rate is a 3.6 percent decline.

Still, those declines are moderate compared with the results of the first quarter of this year. RevPAR was down 17.7 percent compared with the same period in 2008, occupancy was down 10.9 percent and average daily rate down 7.7 percent.

"With the first quarter of 2009 now behind us, it is clear that declining room rates are taking a harder toll on performance than we were expecting," Smith Travel Research president Mark Lomanno said in a statement. "It appears that many hoteliers are embracing the very same pricing and room distribution strategies implemented in the 2001/2002 downturn."

Though the second quarter also is forecast to be difficult for hotels, there will be some improvement in the second half of the year, the firm said. Looking further, Smith Travel Research said it now expects occupancy to remain flat in 2010 while rates increase by 1.5 percent.