PKF Sees Rebound In Hotel Profitability

Profits for U.S. hotels in 2004 are expected to jump 14.3 percent, following declines in each of the previous three years ranging from 9.6 percent to 19.4 percent, according to statistics released this week by PKF Consulting in Atlanta. The increase in profitability reflects an improvement in occupancy and room revenues as demand from both business and leisure travelers increases.

Yet, PKF executive managing director Mark Woodworth put the 2004 projection in perspective. "The increase in profits sounds strong, but U.S. hotel profits are off by 36.2 percent since 2000. This year's projected increase just barely brings hotel profits back to 2002 levels," he said. By contrast, the industry in the mid-1990s saw annual profit growth in excess of 15 percent. "This rate of growth is achievable again," Woodworth said.

Rising labor costs, meanwhile, threaten to compromise future profitability. These costs rose 3.1 percent in 2003 and are expected to continue to grow steadily in the next few years. The cost of employee health benefits alone increased 7.1 percent in 2003.