U.S. Hospitality Sets Record For Year-End Profitability

<B>U.S. Hospitality Sets Record For Year-End Profitability</B>

By Bruce Serlen

The American Hotel & Motel Association last month announced that 1999 was the most profitable year on record for the U.S. lodging industry, netting $22 billion in pretax profits. Last year was 5.8 percent more profitable than in 1998 and nearly double the amount in 1996.

For travel buyers, the positive report is a mixed blessing. On the one hand, the healthy national economy that underlies the numbers has created increased opportunities for domestic business travel from which their companies benefit. On the other hand, a strong lodging industry translates into less inclination on the part of hotel companies to negotiate favorable rates in return for volume commitments.

The 1999 numbers represented the fourth consecutive year of record results for the U.S. lodging industry. After suffering losses a decade ago due to declining occupancies and slowing RevPAR growth, the industry continued its steady advance in 1999. "Demand from business travelers grew a solid 2 percent to 3 percent," said Bill Evans, associate director for lodging at D.K. Shifflet & Associates, which contributed data along with Smith Travel Research and other research.

Total industry revenue rose to $99.7 billion in 1999 from $62.8 billion in 1990. Total pretax profits rose to a $22 billion gain from a $5.7 billion loss in 1990. Also according to the data, there were 52,000 U.S. properties in 1999, or 3.9 million rooms. The average occupancy rate was 63.2 percent; the average room rate was $81.33. This room rate compared with $78.62 in 1998 and $57.96 in 1990.

Business travel remained crucial to the lodging industry's success. Individual business travel accounted for 29.7 percent of the industry's bookings during the year, while corporate group was responsible for another 24.4 percent.

The tourism industry--of which lodging for business travel is a component--is the third largest retail industry in the country, behind automotive and food stores.