Room Revenue Jumped 7.8 Percent In 2004 Hotel Rebound

Fresh data from a leading industry source confirms earlier indications that the lodging recovery that began tentatively at the end of 2003 gained momentum in gateway cities through 2004. Occupancy in 2004 for U.S. hotels jumped to 61.3 percent, a 3.7 percent increase over 2003, according to final year-end figures released yesterday by Smith Travel Research, a Henderson, Tenn.-based firm that tracks lodging industry performance. Average room rates increased 4 percent, while revenue per available room, which combines occupancy and ADR into a key industry productivity measure, gained 7.8 percent.

Unlike 2001 to 2003, the most significant RevPAR gains were in the Top 25 markets, said Robert Bowers, STR vice president of operations. Bowers cited unexpected strength in the meetings market as one of the drivers in the recovery. Large meetings in particular tend to book Top 25 markets. "Growth in group demand helped fuel the industry's gains," he said.

The recovery gave hotels confidence to seek higher rates in negotiations with buyers for 2005. STR is equally bullish about 2005. Industry room supply increased only 1 percent in 2004 and supply growth is expected to remain moderate through this year.

"Room rate increases should be the primary driver of RevPAR growth," said STR president Mark Lomanno. "Occupancy improvement should continue, although probably at a somewhat lower pace."