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PricewaterhouseCoopers 2010 Lodging Forecast
Suggests Continued Decline for Hotels ADR

By Brandon C. Baker, The News-Herald, Willoughby, OhioMcClatchy-Tribune Regional News

Nov. 15, 2009--What's good for the consumer isn't always favorable for the entrepreneur.

That's the case with hotel room prices, which are expected to drop a total of 8.8 percent in 2009 compared with 2008. They will continue creeping down in 2010, though at a much slower rate, according to the 2010 lodging forecast from PricewaterhouseCoopers Hospitality & Leisure Practice.

"It is expected that the steepest declines in ADR (average daily rates) have passed, but that year-over-year ADR levels will continue to decline, resulting in a 1.8 percent decline" next year, PricewaterhouseCoopers said.

A 3.2 percent increase in the number of hotel rooms this year added to the hotel industry's problems, PricewaterhouseCoopers said, expanding supply just as consumer demand weakened and further hurting the ability of hotel operators to maintain stable pricing.

Johnny Sahota, general manager at Comfort Inn in Wickliffe, knows all too well about such struggles. He says overall sales within Comfort Inn's sector covering Northeast Ohio and parts of Pennsylvania are down about 16 percent from last year. A regional franchise director personally delivered that news during a visit two months ago.

"We dropped our rates, trying to get more people in," Sahota said, "and it made a little difference, but not too much."

Lake County Visitors Bureau Executive Director Robert Ulas said area hotels here have had to reduce rates, but not to the extent of their national counterparts. Still, he reported a large difference between year-to-date bed tax receipts in 2009 and 2008.

Through this October, the county has received $563,941 compared with $681,043 for the same period last year. The bed tax supports the mission of the bureau, funds cultural activities in the county and contributes $240,000 annually through 2013 to help retire the bonds for construction of Classic Park in Eastlake.

"This is not a good thing," Ulas said. "This is the worst (bed tax level) since 9/11."

Still, many new hotels across the nation, including a number of luxury projects and high-end renovations like the Fontainebleau in Miami and the Roosevelt in New Orleans, have opened during the recession as projects that were planned before the downturn came to fruition.

When the high-end Hampton Inn & Suites in Mentor opened this spring, franchisee and General Manager Alpesh Patel said a bad economy wouldn't stop his operation. He maintains that stance months later, but admits business has taken a hit.

"Definitely, some of the leisure business and corporate traveling is a little less," Patel said, "but at the same time, we're hearing companies who will be coming back with more traveling next year. There's no doubt about this year, but we are hearing some positivity also and not only the negative way."

Nationwide occupancy levels for 2009 are expected to decrease 8.4 percent over the previous year to 55.2 percent, PricewaterhouseCoopers said, meaning that hotels in 2009 will be on average just over half-occupied.

The number of hotel rooms available is expected to continue to grow next year but so will demand, leading to a slightly higher hotel occupancy rate for 2010 of 55.8 percent, the report said.

That's still 7 percentage points below the long-term average for the industry of 62.8 percent occupancy.

In addition to hope for more corporate travel, Sahota believes this could improve for hotels in Northeast Ohio if visitors had more reasons to come to the area.

"There's not much going on in this area ever," he said. "If the city held more festivals, conventions, something more... I think (legalizing casinos in the state) is a good thing, and hotel-wise, we can start getting more people."

While the decreases have resulted in lowered revenue for the hotel industry, they've been a boon for consumers looking for travel bargains, as hotels have slashed rates and offered deals in order to lure guests.

Ulas said his bureau and county await a market rebound, but have no idea when that might occur.

"To a smaller bureau like us that has to fund the stadium and arts and culture, it becomes a major concern," Ulas said. "Every economist has a different take, but overall they're saying a couple of years.

"This is the new now, and that translates into working harder with less."

The Associated Press contributed to this report.

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Copyright (c) 2009, The News-Herald, Willoughby, Ohio

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