The hospitality industry faces unprecedented challenges in 2002: war and recession, a drop in corporate travel and fallout from the September 11 attacks. Ernst & Young sums up the challenges—and provides a rough map on how to ride out the storm—in its recent "2002 National Lodging Forecast."

Perhaps not surprisingly, the report found that some markets are fairing better than others. San Diego is poised to recover the fastest, within three months. Markets like Baltimore, Chicago, Detroit, and San Antonio are set to recover in about five months. Atlanta, Boston, Dallas, Denver, Houston, Los Angeles, Miami, Orlando, Philadelphia, Phoenix, Puerto Rico, Seattle, and Washington D.C. should recover in six to twelve months. However, Hawaii, Manhattan, and San Francisco may take up to fourteen months before they recover, says the report.

Another of the industry-wide effects is the slowing of new hotel construction. While seemingly a negative, Chase Burritt, report author and Ernst & Young’s Hospitality Services Group national director, points out that the slow construction growth may actually be a positive.

"Today, there are fewer rooms under construction than at any other time during the past three years. That slowing in supply should actually stabilize occupancy rates and help the recovery process begin to take hold in 2002," says Burritt.

Burritt sees a recovery for the industry beginning in 2003 and the market returning to normal in 2004. His report offers strategic advice so hotel operators can analyze their operations and find cost reductions that have a minimal impact on staff and can be realized in the short term. The report provides thoughts on cost containment and operational efficiencies including changes in staffing schedules, energy strategies, management company selection, property valuations and asset management.

The complete report - "2002 National Lodging Forecast," which includes Ernst & Young’s market analysis on original research and numbers compiled by Smith Travel Research, can be downloaded at: www.gallen.com/eykl/HSGReports.htm