Hotel Rates Holding Up

<B> Hotel Rates Holding Up</B>

By Maria P. Vallejo

With up to double-digit growth in hotel rates in some first-tier cities, hotel buyers may not be able to tighten their purse strings easily in 1999. Despite the third consecutive year of decreasing occupancy, industry experts predict rates will continue to climb--and buyers may need to consider consolidating and shifting their business to alternative facilities to keep their budgets from following suit.

"Occupancy may be dropping, but it doesn't seem that there's that much competitive pressure on hotels to curtail increases in average room rates," said hospitality analyst Robert Mandelbaum at PKF Consulting in New York. Plus, he noted, national averages can be deceiving: "The industry is not moving in a uniform fashion across the country. The story is different in each city."

Insiders said they expect rate increases to range between 2.5 and 20 percent depending on location, date and pricing tier. New York-based PricewaterhouseCoopers predicted the U.S. average daily rate will increase 4.6 percent in 1999, to $82.58. Smith Travel Research of Hendersonville, Tenn., estimated a more conservative 4 percent increase, while PKF Consulting said it expects a 6-7 percent rise.