With the lodging industry headed toward recovery from its three-year slump, hotel rates are likely to increase in 2004, according to Bjorn Hanson, global lodging analyst with PricewaterhouseCoopers LLP. Speaking at the Professional Convention Management Association's annual meeting in January, he projected an average room-rate increase of about 2 percent for 2004 and 3 percent next year.

Average room occupancy rate is expected to go from 59.3 percent in 2003 to 61.2 percent in 2004, while revenue per available room (RevPAR) is forecast to jump 5.2 percent in 2004. In 2003, RevPAR increased just 0.3 percent, according to PWC data. Moreover, Hanson forecast that aggregate profits for hotels will rise an impressive 15.9 percent in 2004 — after declining 3.9 percent in 2003. Upscale and upper upscale hotels will lead the charge with RevPAR climbing 6.7 percent and 5.9 percent respectively.

“The perceived balance of power between hotels and meeting/convention planners will shift in most markets to the hotels,” stated Hanson in his PCMA presentation. He suggested that planners take a look at cities where demand is not growing as fast as supply.

Groups/meetings/conventions will be a lower priority for hotels as 2004 evolves, he said, and this trend will continue into 2005. Hanson also said that it will be increasingly difficult for planners to maintain room block compliance because of the growing use of the Internet for travel research and booking. He noted that travelers' safety concerns are still slowing occupancy growth, but not as much as in the last two years. For more information on lodging trends, visit www.pwcglobal.com.

U.S. LODGING INDUSTRY FORECASTS
History Forecast
'00 '01 '02 '03 '04 '05
Occupancy Level (%) 63.3 59.7 59.1 59.3 61.2 61.7
Percentage Change from Prior Year
Average Daily Rate 5.6 -1.0 -1.4 -0.1 1.9 3.0
RevPAR* 6.3 -6.6 -2.5 0.3 5.2 3.9
Sources: PricewaterhouseCoopers LLP and Smith Travel Research
*Revenue Per Available Room.