Even as U.S. Hotel Occupancy Rates Decline, Average Daily Room Rates Rise, PricewaterhouseCoopers Lodging Research Network Reports

"Overall, demand for hotel rooms in the U.S. will grow a solid 2.8 percent this year and a more moderate 2.0 next year," forecasts Bjorn Hanson, Ph.D., New York-based chairman of the PricewaterhouseCoopers lodging and gaming group, creators of the Lodging Research Network (www.lodgingresearch.com). "Rising demand will fuel an increase in average daily room rates -- even as overall U.S. occupancy rates decline."

Occupancy and Average Daily Rate Forecasts by Hotel Segment

Of the five hotel segments tracked by PricewaterhouseCoopers (Luxury, Upscale, Midprice, Economy and Budget), occupancy rates will fall most in the Midprice and Economy segments, www.lodgingresearch.com says. Occupancy will drop 1.3 percentage points in each of those segments.

At economy hotels, occupancy will decline to 58.0 percent in 1998 from 59.3 percent last year, but average daily room rates in the Economy segment will rise 3.7 percent to $53.29 in 1998 from $51.39 in 1997, the Lodging Research Network says.

At Midprice hotels, occupancy will decline to 63.6 percent in 1998 from 64.9 percent last year, according to www.lodgingresearch.com, but average daily room rates will rise 5.3 percent to $71.69 in 1998 from $68.06 in 1997.

America's Upscale hotels will experience a 0.8 percentage point decline in occupancy to 66.9 percent in 1998 from 67.7 percent in 1997, according to the Lodging Research Network. Still, average daily room rates will rise 4.6 percent at Upscale hotels to $92.71 in 1998 from $88.64 in 1998, www.lodgingresearch.com reports.

Luxury hotels will experience "stable" occupancy -- falling only 0.1 percent point to 73.8 percent in 1998 from 73.9 percent last year, www.lodgingresearch.com says. But average daily room rates will rise 5.8 percent at Luxury hotels to $141.55 in 1998 from $133.82 last year.

Only the Budget category of U.S. hotels will see increases in both occupancy and average daily room rates in 1998, according to the Lodging Research Network. Budget hotel occupancy will rise 0.1 percentage point to 59.8 percent in 1998 from 59.7 percent in 1997, www.lodgingresearch.com reports, as average daily rates increase 4.0 percent to $43.68 in 1998 from $41.98 last year.

PricewaterhouseCoopers 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 PricewaterhouseCoopers' econometric forecasts for the lodging industry is well established. In 1991, when the lodging industry was experiencing declining occupancy and financial losses, PricewaterhouseCoopers forecast that 1993 would bring a return to profitability and average daily rate increases greater than inflation. Both predictions proved accurate. In the first quarter of 1996, PricewaterhouseCoopers was the first consulting firm to forecast a coming downturn in hotel occupancy. The firm's occupancy " early warning" was issued in April of 1996.

The PricewaterhouseCoopers Lodging Research Network (www.lodgingresearch.com) makes available via the Internet PricewaterhouseCoopers renowned econometric forecasts for the lodging industry, breaking lodging industry news, an exclusive database of lodging industry real estate acquisitions, financial data of publicly traded lodging companies (including SEC filings), new hotel construction data, lodging census data from Smith Travel Research as well as an extensive research library that includes U.S. econometric and demographic statistics. For more information about the Lodging Research Network, call toll-free 888-576-6656.

With a worldwide network of 6000 professionals, PricewaterhouseCoopers' FAS practice provides creative solutions and ideas that increase value to clients during critical periods and when they are making important decisions that define their future. The FAS business is organized along five product lines. The Business Recovery Services, Dispute Analysis & Investigations, and Valuations & Shareholder Value product lines are the largest in the world. The Project Finance & Privatization product line rated second in Privatisation International's global league table by number of privatization financial advisory assignments and second in Project Finance International's global ranking by number of project finance advisory mandates. The Mergers & Acquisitions product line was second in the world in number of deals completed, according to Securities Data Company. PricewaterhouseCoopers advised on 341 deals with a total worth of $33.2 billion.

PricewaterhouseCoopers (www.pwcglobal.com), the world's largest professional services organization, helps its clients build value, manage risk and improve their performance.

Drawing on the talents of more than 140,000 people in 152 countries, PricewaterhouseCoopers provides a full range of business advisory services to leading global, national and local companies and to public institutions. These services include audit, accounting and tax advice; management, information technology and human resource consulting; financial advisory services including mergers and acquisitions, business recovery, project finance and litigation support; business process outsourcing services; and legal services through a global network of affiliated law firms.

PricewaterhouseCoopers refers to the US firm of PricewaterhouseCoopers LLP and other members of the worldwide PricewaterhouseCoopers organization. The information transmitted is intended only for the person or entity to which it is addressed and may contain confidential and/or privileged material. Any review, retransmission, dissemination or other use of, or taking of any action in reliance upon, this information by persons or entities other than the intended recipient is prohibited. If you received this in error, please contact the sender and delete the material from any computer.