Nov. 11, 2010--SAN DIEGO -- The San Diego County hotel industry is beginning to show a "slow and steady recovery" despite several hotels struggling with loads of debt, according to a local hospitality industry expert.

Robert A. Rauch said in his annual forecast that the recovery is taking shape in the final months of 2010 and will continue to build throughout 2011.

The report shows modest increases in occupancy rates, average daily rates, and revenue per available room in 2011. "An economic recovery, although not robust, is under way," he said. The full affects of the recovery won't be visible until 2014.

"Hotel values will remain somewhat depressed this year but are headed back up. There is light at the end of the tunnel," said Rauch.

Values of hotel properties in San Diego County will increase as revenue per room increases. There is currently a favorable supply and demand structure in the county, and profits will increase in 2011, he said.

Occupancy rates were at 63 percent in 2009, and are expected to strengthen to 66.4 percent this year. He forecasts occupancy rates of 68 percent in 2011, and 70 percent in 2012.

The average room rate was $124.21 in 2009, but is expected to slip to $121.72 this year, according to Rauch. He forecasts that the average rate will rebound to $129 in 2011, and $136 in 2012.

Even with debt levels mounting on local hotels, Rauch cautioned owners against selling assets too quickly.

"Do not sell if you are able to hang on for a few years when occupancy and (average daily rate) levels return to 2007 levels," said Rauch. "This may take several years but it will happen sometime between 2013 and 2015."

"I'm convinced hotel values will rise because occupancy rates will go up, and there is no new supply of hotels, and the economy is improving," he said.

Call staff writer Pat Maio at 760-740-3527.

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