The average U.S. hotel suffered a 19.4 percent decline in profits in 2001, according to the 2002 edition of Trends in the Hotel Industry-USA, which is published by PKF Consulting and the Hospitality Research Group. The downturn represents the first decline in hotel profitability since 1991, and the largest single-year drop since 1938. The firm projects a continued decline in hotel revenues in 2002.

Convention hotels endured the greatest fall-off in revenue (12.9 percent) and profits (24.3 percent). Full-service hotels and resorts also were hit hard; limited-service properties fared best.

“Going into 2001, we were projecting a modest 5.6 percent decline in hotel profits. Clearly, the events of September 11 exaggerated the drop and contributed to the worst single year deterioration in hotel performance ever,” says R. Mark Woodworth, executive managing director of Atlanta-based HRG.

Based on an estimate of flat occupancy, with a 4.6 percent drop in average daily rates in 2002, HRG is projecting the average U.S. hotel will show an 11 percent decline in profits for the year. “While market conditions are expected to improve somewhat during the third and fourth quarters, the lodging industry has started out the year in a pretty deep hole,” says Woodworth.