"It would be irresponsible for anyone to try to quantify the effect of these tragic events on the performance of the U.S. hotel industry at this time.  It is too early.  Too much is unknown, and events are too fluid," said Mark Woodworth, Executive Managing Director of the Hospitality Research Group.

"Nevertheless, after receiving phone calls from clients, friends, and the media regarding the impact of these events, we feel the importance of discussing those factors that could potentially hurt industry performance, as well as those that could potentially offset any losses," Woodworth said. Prior to Tuesday, September 11, 2001, HRG and PKF Consulting had projected a 3.5 percent decline in REVPAR from its sample of major U.S. cities.

"It should be noted that the 3.5 percent decline in REVPAR for 2001 would have been the greatest annual decline in REVPAR for our sample of major U.S.  cities in the past 40 years," said John Fox, Senior Vice President and head of PKF Consulting's New York City office.

"To perhaps state the obvious, these projections clearly will not be met, and the industry will experience further declines in the near term.  There are several factors that will most likely cause further pain for the hotel industry in what was already shaping up to be a down year, " Fox said.

• Fear of flying.  The hotel industry is closely linked to the airline industry.  If people fear flying, normal travel patterns will be curtailed.  During the Gulf War, both business and leisure travelers feared flying because of a "potential" for disaster.  This time around, the disaster has been actual and has taken place right here in the U.S.  Markets that are "fly-in" destinations, as opposed to regional "drive-in" markets, are most susceptible.
• A "down" economy.  Economists say that this incident could push the current economic downturn into a recession.  This year has already proven the close ties between the general health of the economy and the hotel industry.  If the economy slows down further, then so will hotels.
• Timing in diverse markets.  Timing of the incident will affect markets differently.  For most business and convention markets, September and October are strong months, whereas November through February are not.  By comparison, then, convention markets have the least to lose during the November-February period.  On the other hand, winter season markets like Florida, Arizona, and ski resorts would be hurt most, November through February.  Since leisure travelers tend to be the most volatile, the memories of last Tuesday might linger for the next 4-5 months, and they might not feel ready for air travel until next summer.

On the other hand, the industry has just come off a very good nine-year run of performance.  Therefore, going into 2001, hotels were in their strongest fiscal position in years for handling poor performance.  While our projected decline in REVPAR for 2001 is the worst in 40 years, the hotels in our survey sample were still achieving occupancies and Average Daily Rates greater than long-term averages.

PKF Consulting is an international consulting and real estate firm specializing in the hospitality industry.  The Hospitality Research Group, based in Atlanta, is its research affiliate.