PKF on hotels during recessions

Here's an interesting article: U.S. Hotel Profitability During Recessions, by PKF Hospitality Research. Not surprisingly, historically profits and revenues go down during a recession (though in some cases hotels raise rates to offset occupancy declines to save their financial bacon), and expense control moves into high gear (or at least, keeping expense growth under control). Here's the prediction for this go-round:

As of January 27, 2009, PKF-HR is forecasting lodging demand to decline a cumulative 4.2 percent from 2007 through 2009. Reduced levels of demand, combined with a 5.6 percent increase in the supply of hotels rooms, will result in a 9.1 percent decline in occupancy during the two year period. By year-end 2009, occupancy is forecast to be 57.2 percent, the lowest level since STR began tracking national lodging performance in 1988. Obviously this is something we have not seen before.

They say to look for a 4.6 percent decline in room rates this year, since the decline in occupancy levels will be too steep to offset this time around. Hoteliers will continue to try to save on expenses wherever possible, but PKF expects that, despite their best efforts, profitability will still go down: They "forecast 20.5 percent drop in unit-level profits for the typical U.S. hotel during the current recession."

While every meeting planner likes a buyers market, this isn't good for anyone in the long run.