U.S. hotel occupancy rates will fall from 64.6 percent in 1997 to 63.9 percent in 1998 -- below the 25-year average U.S. hotel occupancy level of 64.96 percent. Meanwhile, average daily room rates will rise 5.0 percent -- from $75.17 in 1997 to $78.94 in 1998. Historical figures are from Smith Travel Research. Forecast figures are from the Lodging Research Network.

"Overall, demand for hotel rooms in the U.S. will grow a solid 2.8 percent this year and a more moderate 2.0 next year," forecasts Bjorn Hanson, Ph.D., New York-based chairman of the PricewaterhouseCoopers lodging and gaming group, creators of the Lodging Research Network ( www.lodgingresearch.com). "Rising demand will fuel an increase in average daily room rates -- even as overall U.S. occupancy rates decline."

Occupancy and Average Daily Rate Forecasts by Hotel Segment

Of the five hotel segments tracked by PricewaterhouseCoopers (Luxury, Upscale, Midprice, Economy and Budget), occupancy rates will fall most in the Midprice and Economy segments. Occupancy will drop 1.3 percentage points in each of those segments.

At economy hotels, occupancy will decline to 58.0 percent in 1998 from 59.3 percent last year, but average daily room rates in the Economy segment will rise 3.7 percent to $53.29 in 1998 from $51.39 in 1997.

At Midprice hotels, occupancy will decline to 63.6 percent in 1998 from 64.9 percent last year,  but average daily room rates will rise 5.3 percent to $71.69 in 1998 from $68.06 in 1997.

America's Upscale hotels will experience a 0.8 percentage point decline in occupancy to 66.9 percent in 1998 from 67.7 percent in 1997. Still, average daily room rates will rise 4.6 percent at Upscale hotels to $92.71 in 1998 from $88.64 in 1998.

Luxury hotels will experience 'stable' occupancy -- falling only 0.1 percent point to 73.8 percent in 1998 from 73.9 percent last year, But average daily room rates will rise 5.8 percent at Luxury hotels to $141.55 in 1998 from $133.82 last year.

Only the Budget category of U.S. hotels will see increases in both occupancy and average daily room rates in 1998, according to the Lodging Research Network. Budget hotel occupancy will rise 0.1 percentage point to 59.8 percent in 1998 from 59.7 percent in 1997, as average daily rates increase 4.0 percent to $43.68 in 1998 from $41.98 last year.

PricewaterhouseCoopers uses a proprietary econometric model to forecast U.S. lodging industry trends. Underlying macroeconomic assumptions are from the WEFA Group, the Philadelphia-based macroeconomic forecaster. The accuracy of PricewaterhouseCoopers' econometric forecasts for the lodging industry is well established.