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Building Boom to Bring 1,250 New Hotels - Most Ever - In 1997, But No Break in Rates for Travelers, Lodging Research Network Says

Small Drop in Hotel Occupancy Ahead

NEW YORK / Sept. 29, 1997 / Although a building boom in the U.S. hotel industry will add a whopping 127,500 new hotel rooms in 1997 and result in a drop in U.S. hotel occupancy from 64.6 percent this year to 63.1 percent by the year 2000, travelers are unlikely to experience relief from rapidly rising average daily hotel room rates, forecast to increase to $78.47 in 1998 and $82.59 in 1999 from $74.29 this year, according to the Lodging Research Network (www.lodgingresearch.com), the comprehensive Internet-based resource for lodging industry data and information from Coopers Lybrand L.L.P.

"Hotel room construction starts in 1997 will rise another 16 percent from 1996 levels - and will be 53.6 percent above America's 25-year average of 83,000 new rooms per year," according to Bjorn Hanson, Ph.D., New York-based chairman of the Coopers Lybrand lodging and gaming group creators of the Lodging Research Network (www.lodgingresearch.com). "That means approximately 1,250 new hotels will open in 1997, the most ever in a single year," Hanson added, "contributing to the first decline in U.S. hotel occupancy rates since 1991."

But Healthy Demand Will Boost Room Rates - And Company Profits

Relatively healthy demand for hotel rooms and declining-but-still-healthy occupancies will keep average daily room rates high, the Lodging Research Network Reports. Room demand - as measured by average daily rooms sold - will rise 2.3 percent in 1997 and 2.2 percent in 1998, www.lodgingresearch.com says.

"That's sufficient for hoteliers to boost average daily room rates by 6.1 percent in 1997 and 5.6 percent in 1998, the Lodging Research Network reports. "For travelers, the drop-off from peak hotel occupancy levels will be far too small to make finding a hotel room any easier in major U.S. cities," Hanson noted. "But increases in average daily room rates will be noticeable for travelers, especially in primary urban markets," he concluded.

Healthy room rates and fairly consistent demand for rooms will propel the U.S. hotel industry toward another year of record profits, the Lodging Research Network report. Profits will be $14.5 billion in 1997, a record, and will rise to $17.1 billion in 1998, www.lodgingresearch.com says.

Revenue per available room (RevPAR), an important industry gauge that takes into account both occupancy and average daily room rate, will increase 5.5 percent to $48.01 in 1997 and will rise 4.7 percent to $50.27 in 1998. "America's hotel industry will experience record profits every year through 2000," Hanson said.

Coopers Lybrand uses a proprietary econometric model to forecast U.S. lodging industry trends. Underlying macroeconomic assumptions are from the WEFA Group, formerly Wharton Econometrics, 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 experiencing declining occupancy and financial losses, Coopers Lybrand forecast that 1993 would bring 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 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 Lodging Research Network makes available via the Internet Coopers & Lybrand's renowned econometric forecasts for the lodging industry, breaking lodging industry news, an exclusive database of lodging industry real estate acquisitions, financial data of publicly traded lodging companies (including SEC filings), new hotel construction data, lodging census data from Smith Travel Research as well as an extensive research library that includes U.S. economic and demographic statistics. For more information about the Lodging Research Network, call 1-888-576-6656.

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

SOURCE: Coopers & Lybrand L.L.P.

Contact: Adam Brecht of Coopers & Lybrand, 212-259-5996, Adam.Brecht@us.coopers.com


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