Lodging experts see U.S. hotel rates falling in ’10

* Room rates to decline for second year in a row

* RevPAR declines in ’09 ‘unprecedented’

By Deepa Seetharaman

SAN DIEGO, Jan 25 (BestGrowthStock) – U.S. lodging experts forecast
another year of declines for hotel room rates and profitability
as the industry continues to grapple with weak demand and a
growing supply of new rooms.

Data firm Smith Travel Research forecast a 3.2 percent drop
in both room rates and revenue per available room (RevPAR) for
2010.

“Room rate recovery will be protracted,” Mark Woodworth,
president of PKF Hospitality, told the Americas Lodging
Investment Summit on Monday. ”

The projected declines come after the lodging industry
suffered one of its worst years. RevPAR fell an unprecedented
16.7 percent in 2009, while room rates slumped 8.8 percent,
according to STR data.

Hotel operating companies responded to the downturn by
cutting room rates in an attempt lure both vacationers and
corporate customers. The sharp decline in room rates, known as
the Average Daily Rate (ADR), remains a major stumbling block
for the industry’s recovery.

Of particular concern is the decline in business from
groups and associations, which tend to book rooms months and
years in advance. Losses in demand in this group has hurt
hotels’ ability to gauge performance in the months ahead.

“Our portfolios saw unprecedented group declines,” Edward
Walter, chief executive of Host Hotels & Resorts (HST.N: ), said
at a panel. “That’s one thing that we used to prop up our
performance.”

Adding to worries is the projected 1.8 percent increase in
the supply of new hotel rooms, which may further depress rates,
Lomanno said.

Still, he said, hotels should consider a more “aggressive
pricing strategy” for there to be a sustained recovery in the
industry.

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(Reporting by Deepa Seetharaman, editing by Leslie Gevirtz)

Lodging experts see U.S. hotel rates falling in ’10