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Coopers Lybrand Lodging Consultants Forecast

In Lodging Boom, Not All U.S. Regions Will Prosper Equally But Even in Underperforming Regions, Numbers Still Good, Firm Says

NEW YORK, March 21 -- The U.S. hotel industry -- led by the Northeast and Pacific regions -- will experience another year of record profits in 1997, but the nation's Central region will lag the others in the boom, according to a just-released econometric forecast by the Coopers Lybrand L.L.P. lodging and gaming consulting practice. In the Central region, a rush of new hotel room supply will mix with flattening regional demand growth to produce slight occupancy declines and slower profit growth, Coopers Lybrand predicts. Still, that development will not halt the U.S. hotel industry's progress toward record profits of $13.7 billion this year, the firm forecasts, compared with $11.2 billion profit last year.

The National Outlook is Still Rosy

"Current and forecast conditions in the hotel industry exceed what anyone would have expected just a few years ago," remarks Dr. Bjorn Hanson, chairman of the lodging and gaming practice at Coopers Lybrand. "Overall, we forecast a 1997 U.S. hotel occupancy rate of 65.6 percent, down slightly from last year's 65.8 percent, but still well above the 20-year average," Hanson explained. "With occupancy solid, we anticipate hoteliers will raise the average daily rate (ADR) charged for U.S. hotel rooms 5.7 percent in 1997 to $75.83 from $71.73 in 1996," he said. "U.S. hotel revenue per available room (RevPAR), a key index of industry performance, will rise 5.4 percent to $18,152 in 1997 from $17,226 in 1996," Hanson added.

The Northeast and Pacific Will Fare Best

But some U.S. regions will fare better than others in the boom, Coopers Lybrand said. In the America's Pacific and Northeast regions, RevPAR growth will exceed that of all other areas, aided by minimal additions to hotel room supply and healthy expansion of demand, Coopers Lybrand predicts.

In the Pacific (comprising California, Oregon, Washington, Alaska and Hawaii), annual RevPAR will rise a robust 8.9 percent to $22,003 in 1997 from $20,201 in 1996, Coopers Lybrand predicts. The Pacific's projected 1997 hotel occupancy rate of 70.8 percent combined with a minuscule 1.0 percent addition to existing hotel room supply underlie the region's strength, according to Coopers Lybrand's analysis.

In the Northeast (Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont), annual RevPAR will rise 8.2 percent to $23,636 in 1997 from $21,843 in 1996, Coopers Lybrand forecasts. Contributing to the Northeast's performance, are a very solid projected 1997 hotel occupancy rate of 67.4 percent and a moderate 1.0 percent increase in hotel room supply region-wide, Coopers Lybrand forecasts.

The South Atlantic region (Delaware, Georgia, Florida, Maryland, North Carolina, South Carolina, Virginia, West Virginia and Washington, D.C.) will also be a revenue leader, with a 6.4 percent RevPAR increase to $18,105 in 1997 from $17,009 in 1996. But in the South Atlantic, the rate of hotel supply growth will approach the rate of hotel demand growth, resulting in a meager 0.6 percent rise in occupancy, according to Coopers Lybrand's projections. Still, Hanson observes, "Even under these conditions, the South Atlantic looks very strong."

The Central U.S., Mountain Regions Will Fare Less Well

Faring less well will be the Central United States, Coopers Lybrand says. In this 20-state region that includes Ohio, Kentucky, Tennessee and Alabama in the east and the Dakotas, Nebraska, Kansas, Oklahoma and Texas on the west and the states in between, annual RevPAR is forecast to rise only 3.3 percent to $14,238 in 1997 from $13,784 in 1996. Contributing to the less-rosy prediction for this region are its relatively low 62.0 percent occupancy rate and considerable 3.7 percent rise in the supply of new hotel rooms, Coopers Lybrand says.

Likewise, the Mountain region will fare less well than others because of rapid supply growth. The territory comprising Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah and Wyoming will experience an annual RevPAR increase of 4.3 percent to $18,304 in 1997 from $17,550 in 1996, Coopers Lybrand forecasts. The region's performance will be hindered by a projected 0.6 percent decline in occupancy to 67.5 percent in 1997. That drop can be traced to a 3.8 percent increase in room supply during the year, Coopers Lybrand says. "Still, the Mountain region will experience lodging demand growth above 3 percent during the next three years," Hanson said. "Attributable in part to the area's continued strong economy, including annual employment growth of 3.3 percent."

Coopers Lybrand uses a proprietary economic model to forecast U.S. lodging industry trends. Underlying economic 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 still declining in occupancy and losses were mounting, Coopers Lybrand forecast that 1993 would be distinguished by a return to profitability and average daily 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 lodging consulting firm to forecast a coming downturn in hotel occupancy. The firm's occupancy "early warning" was issued in March of 1996.

Coopers Lybrand's exclusive forecasts for U.S. hotel occupancy, average daily rate (ADR), revenue per available room (RevPAR) and other key indices are published in Coopers Lybrand Hospitality Directions. Available by subscription, Coopers Lybrand Hospitality Directions analyzes industry empirical research and financial data, reveals developing industry trends and provides timely strategic information valuable to hospitality industry leaders, owners, management, investors and attorneys. Each issue includes a 12-quarter forecast for the hospitality industry. To order Coopers Lybrand Hospitality Directions, call toll-free at 1-888-CL-HOTEL or 1-888-CL-GAMING.

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 cities and, through the global network of Coopers Lybrand International, more than 74,000 people in 142 countries worldwide.

If you would like to learn more about Coopers Lybrand L.L.P., our Internet address is:

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