Smith Travel Lowers Lodging Revenue, Occupancy Forecast

Smith Travel Research today released revised projections for the lodging industry through 2010 in which the firm predicts continued rate growth but declining revenue and occupancy, as supply outpaces demand for the next three years.

"We've had an entire year in which we've had a cheap dollar fueling more international visitors, and New York to date has had another good year," Smith Travel Research CEO Randy Smith said in a statement. "We expect those two things to level, so two of the things that have been good for the U.S. lodging industry aren't going to be there in the foreseeable future."

For full-year 2008, STR anticipates that occupancy will drop by 3 percent to 61.2 percent and revenue per available room will drop by 0.4 percent, compared with full-year 2007 levels. Average daily rate, meanwhile, will increase by 3.4 percent.

Rate growth will slow down but continue in 2009, annually increasing by 1 percent, according to STR. Occupancy, meanwhile, will drop to 59.1 percent, its lowest level since 2003, and RevPAR will drop by 2.5 percent.

The picture will look similar in 2010, with rates still increasing by 2.1 percent but occupancy continuing to drop to 58.7 percent. The firm expects RevPAR to begin increasing again in 2010, by 1.5 percent.

STR expects to see about 2.5 percent growth in supply both this year and in 2009, and a 1.2 percent increase in 2010. Demand is expected to drop all three years.