"During good economic times, it is relatively easy to be successful in the hotel industry," said R. Mark Woodworth, Executive Vice President of PKF Consulting in Atlanta. "Experience dictates that owners and managers must shift their focus from expansion to operations. The fundamentals of effective marketing, guest service, and cost controls become paramount in order to maintain profitability."

In the face of overseas economic troubles and scares from Wall Street, several U.S. hotel companies have already made public their plans to curtail new development and concentrate on the operation of their existing assets. "A good economy not only generates demand for hotel rooms, but provides for an environment of available capital to fund new development," says Woodworth. "The recent declines on Wall Street have virtually shut off the funds from the source that has fueled the hotel industry's most recent period of expansion. Now is the time for the REITs and other public companies to focus on the basics of hotel operations."

The PKF Consulting report projects that by year-end 1998, unit level hotel profits will have doubled from 1992. A major reason for the growth in profits has been the 36.4 percent growth in average room rates from 1992 through 1998, a pace that is twice the rate of inflation during the same period. The report documents that fact that hotel profits grow exponentially when room rates increase in excess of inflation.

"A large benefit of the 1990s growing economy has been the confidence it gave consumers and the profits enjoyed by corporations," says Woodworth. "Increased consumer confidence leads to less price sensitivity among leisure travelers. In addition, a corporation's travel budget can better accommodate higher travel costs in an environment of strong revenue and profit growth. If the domestic economy continues its slowdown, we will most likely see a curtailment in leisure travel and a reluctance of companies to pay for high- priced hotel rooms."

Woodworth warns that industry leaders must begin to react now, even though today's statistics look healthy.

"History has proven that the hotel industry will slide into its own decline one-quarter to one-half a year later than the rest of the economy," he says. "Lodging typically suffers more than other industries when the economy declines, plus, it takes a longer time to recover. However, I believe that if you can ride out the next two years, you will be in a prime position to reap the rewards associated with the expected industry rebound into the next millennium."

In addition to chronicling the historical movement of profits and room rates, the PKF Consulting report contains information and statistics on such topics as revenue growth, departmental expenses, and labor costs. "In the past few years, we have seen a tremendous increase in the demand for hotel statistics," says Robert Mandelbaum, Director of Research for PKF Consulting. "We use this data to assist our clients understand what makes their hotel's profitable. I am sure any hotel owner or operator would find the statistics in our report extremely valuable in evaluating their future operations."

Copies of the full report are available by calling Ms. June Hagstrom of PKF Consulting at 404-842-1150. The cost is $150.

PKF Consulting is an international consulting and real estate firm specializing in the hospitality industry. The firm is headquartered in San Francisco, with offices in New York, Boston, Philadelphia, Atlanta, Houston, Los Angeles, Washington, DC., and Singapore. PKF Consulting is a wholly owned subsidiary of Hospitality Asset Advisors International.