Aug. 28, 2009--Even with the plushest pillows around, local hotel operators have been losing sleep.

A new report on Dallas-area inns shows big drops in every crucial measure: demand, occupancy, average daily room rate and the all-important revenue per available room.

Some stats will see measured improvement later in the year, but local performance will remain subpar until 2011, according to the "Hotel Horizons" report from PKF Hospitality Research, Smith Travel Research and Moody's economy.com.

For the first six months of 2009, demand was off by 10.9 percent, occupancy by 12.4 percent, average daily room rate by 8.3 percent and revenue per available room by 20 percent from the same period a year earlier, the report says.

For the full year, the report forecasts a 7.5 percent drop in demand, an 8.7 percent decline in average daily room rate and a whopping 18.5 percent tumble in revenue per available room.

That's due in part to a projected occupancy rate of 53 percent -- down nearly 11 percent from a year earlier.

"We haven't seen room rates drop like this since the '80s," said Lisa Swain, a Dallas-based associate with PKF, a hospitality research and consulting firm. "We knew demand was coming down, but rates have been severely impacted."

The 2009 estimates are based in part on reports from the first quarter -- typically the strongest in North Texas -- and the second quarter. During the second three-month span, things started looking worse, causing PKF to revise downward a forecast it had made a few months before.

The industry is suffering from the "AIG effect," said Brooke Dieterlen, executive director of the Hotel Association of Greater Dallas -- the fear gripping corporate meeting planners after the insurance giant's public drubbing for scheduling a meeting at a posh Phoenix resort shortly after its $85 billion bailout.

"That alone was like the 9/11 effect," she said.

Tim Sullivan, general manager of the Renaissance Dallas, said he's seen a 20 percent drop in corporate group events at his Market Center hotel.

"There are pockets of the city having more difficulty than others," Sullivan said. "Most are struggling on the group side ... [because critics] demonized corporations having meetings."

Also, the H1N1 scare caused a rash of cancellations and no-shows, he said. Even with the specter of flu looming again, PKF expects hotel demand to pick up toward the end of the year as economic fears ease.

Occupancy rates will remain below average, however, because of new hotels opening this year and next, she said.

And that doesn't count the new Dallas Convention Center hotel, which is set for a Sept. 15 groundbreaking.

City officials and the hotel operator, Omni, say the worst should be over by the time the hotel opens in early 2012.

Given its proximity to the Convention Center, Tom Santora, chief marketing officer of Irving-based Omni, expects occupancy rates of nearly 70 percent -- significantly higher than the region's 62.6 percent long-term average -- once the hotel has been open about five years.

"This is going to change the shape of the city," he said. "I feel good about the long-term future for the hotel."

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