Aug. 24, 2005 - Dallas' hotel market continues to improve, but it will probably be five years before properties once again see the heady profits of 2000, according to an annual forecast released Tuesday by PKF Consulting.

"We are in recovery and we have seen the bottom," said Greg Crown, a Dallas-based hospitality industry consultant with the firm. "The good times are beginning to come back."

Occupancy for Dallas-area hotels is expected to be flat through next year, at 63 percent, about 6 percentage points above the low point in 2003, Mr. Crown said.

Among the top 50 U.S. markets, occupancy is expected to exceed 68 percent through 2006.

Hotel occupancy rates are considerably lower in downtown Dallas, which has suffered from a lack of convention business in recent years. PKF forecasts downtown occupancy rates of about 54 percent through next year.

Dallas set city records in 2000, when business travel and convention bookings boomed nationwide. Demand at U.S. hotels began to recover in 2003, but Dallas' return has been slower.

In part, that's because the industry can't absorb all the rooms. It's easier to build hotels in Dallas than markets such as New York where "it can take a career just to build a hotel," Mr. Crown said.

The city's mix of visitors has also played a role.

Business travelers, who tend to pay higher rates than vacationers, account for about half of Dallas' hotel customers. But those travelers typically return home on the weekends, leaving empty hotel rooms behind.

About 11 percent of Dallas' hotel customers come for leisure -- a market that could play an important role on the area's long-term health if marketing efforts by the Dallas Convention & Visitors Bureau are successful, Mr. Crown said.

"We're heading in the right direction, its just going to take awhile," he said.

Dallas-area hotels can expect at least two to three years of solid growth as the economy strengthens, Mr. Crown said. But if the city wants to secure strong demand over the long term, it must make its downtown more attractive.

"Dallas has always been a great business destination, but it has never been a great leisure destination," he said. "We have to fix that."

Frank Naboulsi, chairman of the Hotel Association of Greater Dallas and general manager of the Fairmont Dallas, said the city is getting back on track, but still has work to do.

"When you go downtown and see streets that are deserted, visitors aren't going to want to be there," he said. "It's important that we revitalize downtown."

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