PwC Upgrades Hotel Industry Outlook

Occupancy rates at U.S. hotels will grow 1.2 percent this year, to 61.3 percent, while average daily rates will increase 1 percent, according to quarterly projections announced today by PricewaterhouseCoopers that are more upbeat than the consulting firm's previous industry estimates.

In December, PwC offered what it termed a "prolonged weakness scenario" where occupancy rates for 2002 fell to 58 percent and average daily rates increased only 0.2 percent. PwC also said that revenue per available room, an important measure of hotel profitability, now is expected to grow 3 percent this year as opposed to declining 3.7 percent as projected in December.

PwC cited an unexpected increase in demand for hotel rooms in the first quarter for the revised projections. To put today's data in perspective, however, U.S. occupancy rates for 2000, which was a banner year for the industry, were 63.7 percent.

"Our prior forecast indicated that 2002 occupancy would have been lower than all but seven of the past 75 years," according to Bjorn Hanson, global leader of PWC's hospitality and leisure practice. "Based on our current forecast, 2002 occupancy will be lower than all but 14."