Articles
"Hotel Profits to Be
Strong", Wall St. Journal, © Peter Sanders 12/8/05
Despite a flurry of devastating hurricanes as well as higher prices for gasoline
and airline tickets, the hotel industry is set to post record profit this year
followed by at least two more years of solid growth, an industry report
predicted.
Robust business and leisure travel, combined with slow
construction of new hotels, have given hotel operators vast pricing power and
allowed owners to reinvest capital in their properties, according to the report
prepared by PricewaterhouseCoopers' hospitality-and-leisure practice, set for
release today.
Travelers will continue to notice the steepest rates in cities
such as New York, San Francisco and Chicago that are experiencing high
real-estate prices and -- in some cases -- a loss of hotel rooms because of
condominium conversions, the New York consulting firm said.
The industry is expected to earn $20.8 billion before taxes
this year, nearly a 25% increase over last year, PricewaterhouseCoopers said. It
expects growth to remain strong but to slow to about 21% next year and about 18%
in 2007.
"The last two years were extraordinary," said Bjorn Hanson,
managing partner of the firm's leisure practice. "Though 2006's growth won't be
as high, we usually don't have three years where we have the combination of rate
and occupancy growth that we have right now." Increases in nightly rates,
especially in the upper echelon of hotels, have driven the industry's success,
he added.
The continuing appreciation of hotel real estate, combined with
the $4.8 billion in capital improvements by hotel owners and operators this
year, has boosted the industry. Revenue per available room -- an indicator of
industry health -- is expected to be up 8.1% this year and to continue to grow
through 2007.
Starwood Hotels & Resorts Worldwide Inc.,
Hilton Hotels Corp. and
Marriott International Inc. all have said they expect to see revenue per
room grow between 7% and 10%.
Separately, PKF Hospitality Research in Atlanta said that by
the end of the year the average daily room rate will be about $105.16. The firm
expects that figure to rise 3.1% to $108.42 next year. The biggest jump in rates
is expected along the West Coast, where PKF forecasts average rates will jump 5%
to $114.92 from $109.37.
Meanwhile, adding to the industry's outlook -- but frustrating
travelers looking for cheaper prices and increased availability -- the supply of
new hotels won't grow significantly in 2006. Even as the nearly 42,000 hotel
rooms knocked offline by Hurricane Katrina gradually return to service,
PricewaterhouseCoopers forecasts only a 1.4% supply increase in 2006.
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