Hotel RevPar Plummets Below Expectations

Hotel revenue per available room will decline more precipitously this year than originally was anticipated, according to projections released today by consulting firm PricewaterhouseCoopers.

RevPar, a key factor in hotel industry profitability, will decline 2.3 percent for the year, as opposed to the 0.7 percent drop PwC had forecast earlier. For 2003, the firm projects only a modest rebound of 3.5 percent. Bjorn Hanson, leader of the firm's leisure and hospitality practice, cited several factors for the erosion in hotel profitability: failure of the national economy to strengthen, continuing decline in business travel, sharp drops in the stock market, lack of consumer confidence, frustration with air travel and fear of military action against Iraq.

For travel buyers, continuing weakness in lodging industry revenue bodes well for the upcoming negotiations for 2003 rates, since many hotels are more likely to offer attractive rates in return for marketshare gains.