Occupancy Rates Expected To Be Lowest In Decade

Lodging industry experts today predicted that U.S. hotel occupancies this year and in 2002 would be the lowest in a decade, further evidence of the toll the events of Sept. 11 were taking on an industry already suffering the effects of a weakened national economy.

For buyers, low occupancy rates are apt to make hotel companies more flexible on rate negotiations, assuming buyers are able to move market share significantly in a hotel company?s favor.

"With softness particularly intense in the top 25 markets, we predict occupancy rates for 2001 will be 60.7 percent for the year and 60.3 percent for 2002," said Mark Lomanno, president of Smith Travel Research. In 2000, occupancy rates nationwide were 63.5 percent.

Lomanno attributed the weakness in the major markets to the fact that they are mostly the major gateway cities in which travelers typically fly in and out. Since Sept. 11, many travelers have been anxious about air travel. By contrast, travelers often reach secondary and tertiary markets by car.

PricewaterhouseCoopers' occupancy projections, meanwhile, were even a bit lower. "We expect occupancies for this year to end up 60.5 percent and 60.1percent in 2002," said Bjorn Hanson, head of the global hospitality and leisure practice.

According to Hanson, the best news for the U.S. lodging industry at the moment concerns the supply pipeline.
"With 44,000 new room starts predicted for 2002, it would be the lowest number of starts since 1993. Less new supply helps the weakening of demand."

Lomanno and Hanson both made their projections at the New York meeting of the Hospitality Sales and Marketing Association International dedicated to "moving the Industry Forward."