U.S. Hotel Occupancy Dropping Across All Categories, Coopers & Lybrand Lodging Research Network

NEW YORK, Jan. 26 / Occupancy rates at all categories of U.S. hotels will decline in 1998 compared to 1997, according to the Lodging Research Network ( www.lodgingresearch.com ), the comprehensive, Internet- based resource for lodging industry data and information from Coopers & Lybrand L.L.P. The decline breaks a three-year trend for upscale hotels -- and a five-year trend for luxury hotels -- during which occupancy rose in those segments, according to historical Smith Travel Research data on the Lodging Research Network (www.lodgingresearch.com).

"We are now seeing a weakening across the fundamentals of the U.S. hotel industry," observes Bjorn Hanson, Ph.D., New York-based chairman of the Coopers & Lybrand lodging and gaming group, creators of the Lodging Research Network. "This is a turning point for U.S. lodging."

In 1997, luxury and upscale hotels alone among all types enjoyed continued occupancy growth, according to historical Smith Travel Research data on the Lodging Research Network. But now, even for these top-tier hotels, occupancy is on the wane. Occupancy at luxury properties will dip to 73.4 percent this year from 73.7 percent in 1997, while occupancy at upscale hotels will drop to 66.1 percent in 1998 from 67.1 in 1997, according to www.lodgingresearch.com. Further, the downward occupancy trend will continue across all categories through 1999, the Lodging Research Network reports.

Occupancy Drops Even As Construction Cools

The drop in occupancy at the upper tier comes despite a leveling in U.S. hotel construction after four years of increasing building, the Lodging Research Network says. 1997 saw the start of 142,800 new U.S. hotel rooms, according to the Lodging Research Network, an 11-year high. By contrast, U.S. hotel construction in 1998 -- including extensive building in the Las Vegas market -- will total just 137,700 starts, according to www.lodgingresearch.com.

Still, Record Profits are Forecast

Although overall U.S. hotel occupancy will drop from 64.5 percent in 1997 to 63.6 percent in 1998, relatively steady demand for hotel rooms combined with growth in average daily room rates (ADR) greater than that needed to offset declines in occupancy will bring the lodging industry another year of record profits, according to Coopers & Lybrand figures on the Lodging Research Network ( www.lodgingresearch.com ). Coopers & Lybrand forecasts 2.2 percent growth in demand for hotel rooms in 1998. That's down from 2.3 percent demand growth in 1997, but still sufficient to bring another banner year to America's hotel industry.

"U.S. hotel industry profits will rise to approximately $16.6 billion in 1998. That's a 16 percent rise over 1997's record profits totaling approximately $14.3 billion," Hanson says.

Coopers & Lybrand uses a proprietary econometric model to forecast U.S. lodging industry trends. Underlying macroeconomic assumptions are from the WEFA Group, the Philadelphia-based macroeconomic forecaster.

The accuracy of Coopers & Lybrand's econometric forecasts for the lodging industry is well established. In 1991, when the lodging industry was experiencing declining occupancy and financial losses, Coopers & Lybrand forecast that 1993 would bring a return to profitability and average daily room rate increases greater than inflation. Both predictions proved accurate. In the first quarter of 1996, in the midst of robust lodging industry occupancy levels, Coopers & Lybrand was the first consulting firm to forecast a coming downturn in hotel occupancy.

Coopers & Lybrand's Lodging Research Network ( www.lodgingresearch.com ) makes available via the Internet Coopers & Lybrand's renowned econometric forecasts for the lodging industry, breaking lodging industry news, all exclusive database of lodging industry real estate acquisitions, financial data of publicly traded companies (including SEC filings), new hotel construction data from F.W. Dodge, selected data from Smith Travel Research as well as an extensive research library that includes U.S. econometric and demographic statistics. For more in formation about the Lodging Research Network, call 1-888-576-6656.

One of the world's leading professional services firms, Coopers & Lybrand L.L.P. provides services for enterprises in a wide range of industries. The firm offers its clients the expertise of more than 16,000 professionals and staff in offices located in 100 U.S. cities and, through the global network of Coopers & Lybrand International, more than 74,000 people in 142 countries worldwide.