Tuesday, January 27, 2009

Another Gloomy Forecast Today for Hotels

The hotel business has hit a wall. For months, industry forecasters have been scrambling to keep up with rapidly accelerating downward trends. For months, the bad news has galloped ahead of analysts' ability to evaluate it.

Today, PricewaterhouseCoopers issued a revised 2009 forecast, predicting that there will be a decrease of 11.2 percent this year in the key metric for measuring hotel performance, revenue per available room, which is called RevPAR.

"Marked declines" in occupancy rates and average daily room rates are driving the trend, the research company said.

Till late last year, the domestic hotel industry had stalwartly (and unwisely, in my opinion) resisted lowering room rates -- until it finally sank in to them that the decline in demand that first was evident in late summer, and became obvious by December, was more than a passing phase.

I'll report more later on the situation, which has left many hotel owners (as opposed to the big hotel companies that manage the properties and franchise the brand names) in desperate condition as debts come due and the necessary revenue simply isn't there to pay the bills.

One look at the Las Vegas Strip -- with huge discounts abounding and major projects physically abandoned -- tells much of the story. And don't even ask about Hawaii.

The U.S. hotel industry -- which drives local tourism economies and accounts for hundreds of thousands of jobs -- is in a depression, and no one knows where or when it will end.

[Update -- Here's another grim forecast, this from PKF Consulting in a report released yesterday:

PKF Hospitality Research in a new report finds that "the number of full-service hotels lacking the cash flow needed to pay their debt will increase by 25 percent in 2009, and property values will likely decrease another 20.1 percent, after a 14/1 percent decrease in 2008."

My note, those numbers add up to a looming debacle for many hotel properties, and before long we're going to start seeing some vacant hotels -- meaning the buildings, not just a bunch of rooms -- will be unoccupied.]


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