Hotel Rates Continue To Escalate

For the week ending Aug. 14, increases in average daily rates at U.S. hotels for the 11th consecutive week outpaced increases in rates of occupancy growth, according to Smith Travel Research data. This indicates the lodging industry rebound, which began at the end of 2003, is strengthening. Both occupancy and ADR figure in the calculation of revenue per available room, the metric that is used to determine hotel profitability.

According to Smith Travel, ADR growth for the week ending Aug. 14 exceeded rates of occupancy growth in 15 of the top 25 U.S. markets. The greatest RevPAR gains for the week occurred at luxury hotels, with 8.6 percent compared to the same week one year ago. New York, Boston and Orlando were particularly strong performers.

That the industry has entered a period of increasing ADR is not particularly good news for travel buyers. Many buyers this month and next month will enter negotiations with their preferred hotels for 2005 rates.

"At current occupancy levels, we look for improving rates going forward," said JP Morgan Chase analyst Harry Curtis.