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Article - 1 : Hotel Industry Downturn Predicted for 2009 & 2010
Two important studies have revealed that hotel industry will continue to face downturn in the year 2009 and 2010. The hotel industry will continue to feel the effects of the economic downturn into 2009 when occupancy rates will bottom out, according to a new report by PKF Hospitality Research.

In its Hotel Horizons report, PKF projects a 0.2 percent decrease in lodging demand in 2008, followed by a 1.1 percent drop in 2009. If projections hold true, next year would be the third consecutive year that demand has declined, marking the first time that’s happened since 1988. The drop in occupancy is due to an extended slowdown of the U.S. economy and airline capacity reductions, explained Mark Woodworth, president, PKF Hospitality Research, Atlanta, in a news release.

While demand is slowing, supply is increasing. By the end of 2009, there will be 275,000 more hotel rooms in the U.S. compared to year-end 2007. However, looking out to 2010 and 2011, new supply will drop sharply due in large part to the credit crunch. “PKF-HR believes the existing restrictive financing environment will linger into 2009, thus delaying or preventing the start of hotel projects currently in the pipeline,” stated Woodworth. The pace of new supply growth is projected to drop 1.4 percent and 1.8 percent in 2010 and 2011, respectively.
With supply and demand moving in opposite directions, hotels will not be able to raise room rates as aggressively in 2009, stated Woodworth. Average daily rate is expected to increase 1.3 percent in 2009, below the rate of inflation and the 3.6 percent gain in 2008.

Mr. Bhavish Bhuta – President of Cyberweb Hotels, LLC held discussion with CEOs of major hotel chains to get their view on the status of Hotel Industry. “Hotel owners who have purchased expensive property with high mortgage will face financial problems in coming months. Each Hotel will have to create effective Internet marketing strategy to get consistent reservations from search engines”, explained Bhavish Bhuta.

Based on current forecasts for the U.S. economy, and historical data from Smith Travel Research, PricewaterhouseCoopers LLP forecasts a 5.8 percent RevPAR decrease in 2009, following a 0.8 percent decrease in 2008. This represents the first consecutive two-year RevPAR decrease since the 7.0 percent and 2.7 percent decrease in 2001 and 2002, respectively.

"The deteriorating outlook for the economy is impacting travel habits and spending, and hotels are expected to experience reduced occupancy levels, and to a lesser degree, some room rate erosion through 2009," said Scott Berman, principal and U.S. Leader of PricewaterhouseCoopers' Hospitality and Leisure practice.

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