Hotel Industry Holds Ground In 1Q, Buyer's Market Slipping

The U.S. lodging industry held up fairly well in the first quarter of the year, despite concerns that security issues related to the war in Iraq, coupled with the still slumbering economy, would depress occupancy rates at U.S. hotels.

According to Smith Travel Research data released yesterday, U.S. occupancy was 54.7 percent for the three months, down 1.1 percent compared with the same period in 2002. Similarly, revenue per available room, a key measure of lodging industry profitability, decreased 1.6 percent over the prior year.

On the plus side for the industry, the development pipeline held steady during the quarter. Mark Lomanno, STR president, said prospects for the industry's full-year 2003 operating performance depended on the state of the economy, the situation in the Middle East and a continued slowdown in the pipeline. The modest first-quarter declines for hotels, however, do not bode well for travel buyers as hotels are less likely to be more flexible on rates in such an environment.