PwC Predicts Slight Hotel Upturn Next Year

Final 2003 occupancy rates for U.S. hotels are expected to reach 59.3 percent, only slightly higher than the 59.1 percent recorded in 2002. While occupancies for 2004 are projected to rise to 61.2 percent due to the strengthening economy, occupancies still are below the 63.3 percent achieved in the banner year of 2000, according to figures released today by PricewaterhouseCoopers at its annual lodging industry briefing in New York.

Revenue per available room in 2003 suffered as a result of the economic downturn and is expected to rise only 0.3 percent from 2002. The picture looks better for hoteliers in 2004, however, when PwC expects RevPAR to grow significantly by 5.2 percent. As with occupancy rates, the brighter 2004 RevPAR outlook still falls short of 2000, when RevPAR grew 6.3 percent.

Not surprising, given RevPAR performance, average daily rate is expected to decrease slightly by 0.1 percent in 2003, but then grow by 1.9 percent in 2004. However, Bjorn Hanson, who heads PwC's hospitality practice, said that the rise in rates next year actually is not as positive a development for the lodging industry as might appear, since inflation in 2004 is expected to rise 1.4 percent.

Compared with 2001-2002, Hanson described the overall performance of the lodging industry this year and next as "a mix of both good and bad news."

While the PwC predictions offer some rays of hope to hoteliers, buyers will continue to wield negotiating leverage in this environment.