Jun. 25--For much of the last decade, hotels across the nation, led by those in New York, have enjoyed boom times -- strong occupancy rates and steadily rising revenues. 

No longer. 

With corporate officials reacting to the nation's economic slowdown by cutting travel budgets, "Vacancy" signs are becoming more common in city, suburban, and rural areas. 

In response, hotels are tightening their belts, cutting room rates, and chasing new business through promotional campaigns and package deals. 

The high end of the market has been hardest hit with occupancy rates crashing by up to 10 percent in some key markets such as New York. Every sector from luxury city suites to roadside motels has been impacted. 

"It's not a good marketplace, and it has hit everybody," said Al Luthy, vice president of Hickory Travel Systems, a Saddle Brook-based national network of travel agencies. "Nobody has escaped it -- no particular brand and no particular area." 

The speed of the downturn caught some by surprise. 

"It's an environment where the numbers have only been going up," said Bruce Serlen, hotel editor of Business Travel News. "So it's startling to a number of people not only that the numbers are in the negative column but the rapidity with which it went from a positive story to a negative story." 

This month, PriceWaterhouseCoopers predicted that nationally, revenue per available room -- the formula that the industry uses to analyze revenue -- would fall by 4.3 percent in the second quarter of this year, the biggest drop since 1991. 

And in May, PKF Consulting, a New York-based analyst of the hotel industry, reported that New York hotel occupancy rates were seven percent lower than last year, pushing room rates down for the first time since 1992. 

Smith Travel research, a Tennessee-based hotel industry analyst, reported that in January, the average national room occupancy rate was three percent higher than a year before. By April, the rate had dropped to 4 percent lower than a year before. 

The picture was far worse in New York: January's occupancy rate was 3 percent lower than a year earlier and by April the rate had plummeted to 12 percent less than 12 months before. 

By contrast, New Jersey has seen only a moderate slowdown, said Sean Hennessey, director of PriceWaterhouseCoopers hospitality consulting practice. 

Hotel occupancy rates in New Jersey continued to rise in January and February, the Smith Travel Research figures show. In March, the figures were the same as the year before. Only in April did the rate tumble, to 3 percent lower than in April 2000. 

John Fox, a senior vice president at PKF, said the modest decline in New Jersey is closer to the national picture than to New York. 

"The rest of the country wasn't coming off anywhere near as hot a market as New York was," he said. 

Indeed, Smith Travel Research figures for revenue per available room in April show that the change in New Jersey -- a rise of 3.1 percent over a year earlier -- was better than 30 other states. 

Corporate travel budgets are at the root of the hotel industry's problem, analysts say. 

Any change in business travel has a significant effect on the hotel industry in the New York-metropolitan area because -- according to figures from PriceWaterhouseCoopers -- commercial travel accounts for 60 percent of hotel use, and meetings and conferences account for 15 percent. Tourist and leisure travelers account for about 15 percent of the market. 

"The primary impact is just cutting back on [business] trips entirely," Hennessey said. For unavoidable trips, companies are demanding that their executives and employees stay at cheaper hotels, a practice known in the industry as "trading down," he said. "There is also a move to double up people in rooms for certain group businesses." 

William Tam, 30, a software developer from Ottawa, Canada, said recently he has cut back significantly on business trips. While having breakfast at the AmeriSuite in Fair Lawn one morning last week, he said he was on the road almost five days a week last year designing Web sites for clients. But this year, his only travel is to training conferences, such as the event that brought him to New Jersey. 

"The work has dropped off," he said. 

At the Hilton Hasbrouck Heights, the loss of corporate travelers pushed revenue down in January and February by 7 percent compared to the same period in 2000, hotel officials said. 

"From our research, this whole area has slowed down on individual business travel," said Bob Sullivan, the hotel's director of sales and marketing. 

An aggressive sales effort to boost corporate group and meeting business at the hotel has since helped lift business back to levels comparable to last year, Sullivan said. 

Although business travel is waning, leisure travel to holiday destinations such as the New Jersey shore, remains strong, analysts say. 

"Leisure travel is holding up," Serlen said. In fact, some leisure travelers are seeing better deals as hotels -- especially in New York -- seek to make up for the lost business travelers by offering cut-price package deals, he said. 

The relative cheapness of New Jersey hotels is one of several reasons the state escaped the worst of the industry slowdown. 

New York's hotel industry is mainly concentrated in Manhattan, but New Jersey has several markets: the areas in the north and south that are impacted by New York City and Philadelphia; the shore area and Atlantic City, which is affected by casino business; and areas such as Princeton, New Brunswick, and Morris County, which have a high concentration of corporate headquarters and offices. 

"New Jersey's mix of business is generally more diverse," Hennessey said. "When you look across even the northern part of the state, or the state as a whole, it has a stronger composition of leisure and vacation travelers as well as regional and state association types of group business. That business will generally continue to be conducted year to year regardless of the economic environment." 

During the 1990s, North Jersey benefited from the booming New York hotel industry and to a lesser extent the healthy market in Philadelphia. Hotels in New York, for instance, sold out all their rooms on about 250 nights last year -- forcing business travelers to look for rooms in North Jersey, analysts say. And likewise, the hotel market around Cherry Hill saw additional customers when Philadelphia hotels filled up. 

So when New York and Philadelphia slowed, so too did New Jersey, analysts and hotel owners say. 

"A lot of our business is pushout business,' said Attilio Petrocelli, president and chairman of Fairfield-based Prime Hospitality Corp., which has 28 New Jersey hotels. "When you have a slowdown in Manhattan . . . you're going to have a slowdown in [New Jersey] business also." 

New Jersey has been cushioned against that trend by its own market of lower-priced hotels that cater to business travelers and corporate executives holding meetings and conferences. 

Just as New York's high prices have prompted serious corporate cutbacks, New Jersey's generally lower room rates have meant fewer cuts because they make a smaller dent in the corporate budgets, analysts say. The average New Jersey room price in April was $101, compared to $142 in New York state and $220 in Manhattan. 

Petrocelli said two of Prime's chains of hotels -- AmeriSuites, with room prices around $120 in New Jersey, and Wellesley Inn and Suites, for around $80 -- demonstrated the apparent preference for cheaper rooms in times of economic slowdown. 

"Wellesley has not suffered at all" from the slowdown, he said. "AmeriSuites has." 

Petrocelli added that leisure travel, accounting for about 35 percent of his hotels' business, had hardly been affected. 

That trend is reflected on the Jersey shore, where several hotels said they have seen little slowdown. 

"It's impacting us, but not significantly," said Rick Wolf, manager of the 92-room Windrift Resort Hotel in Avalon. Like other hotel owners in that area, he said the drop in room occupancy -- which Wolf put at about 3 percent from last year -- could be from the unseasonably cold and wet start to the season. 

Atlantic City, too, has seen little slowdown, said Steven Whiteside, who is vice-president in charge of hotel operations at the Atlantic City Hilton Casino and also president of the New Jersey Hotel, Motel and Lodging Association. 

"People are still taking short trips and spending money," he said. "We're still running very strong occupancy here. Other folks that I talk to in the business have lost a shade of [price] rate, but they're holding their occupancy." 

Some hotel operators and chains are mounting promotional campaigns to keep it that way. 

Petrocelli said that in response to the slowdown, Prime Hospitality in May launched a cable TV and radio campaign to attract new business. Other hotels are throwing in perks to go with a booking, said Luthy of Hickory Travel Systems. 

"Maybe if you are having a small meeting, they might throw in a cocktail reception for the group, at no charge," he said. "They might arrange for transportation to and from Newark Airport, say, at no charge where it used to be a charge. The use of their PC -- they used to charge $25 an hour or something like that. Now they may give it away if you're in a group. . . . They are taking ancillary services and trying to bundle or package them in with the hotel stay." 

Industry insiders are hoping that the downturn is short-lived, and analysts are expecting that a pickup in economic activity will mean better times for the hotel industry by early next year. 

"Most hotel analysts are looking at it to recover in the fourth quarter," said PKF's Fox. "I think we'll see a gradual recovery. It's more of a leveling off and a slight recovery." 

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(c) 2001, The Record, Hackensack, N.J. Distributed by Knight Ridder/Tribune Business News. PDQ,