�Investor interest in lodging and in initial public offerings has dissipated as profit growth has slowed, and as supply continues to grow faster than demand. The prices that would be paid now for stock, either from IPOs or secondary offerings are too low and result in too high a cost of capital. This is dilutive to existing shareholders and too expensive for the companies,� said Bjorn Hanson Ph.D., global leader of PricewaterhouseCoopers Hospitality  Leisure Practice.

According to Smith Travel Research, in 1994 the lodging industry posted record profits for the first time since 1982 of $5.5 billion and profits grew at a rate of 129 percent. In 1994 there were six initial public offerings and nine secondary offerings (including lodging REITs and lodging C-corps). At the end of 1999, by comparison, the lodging industry is expected to post profits of $22.5 billion, which is a 7.8 percent profit growth from 1997.

�While 1999 represents another year of record profitability, and profits are still growing at rates faster than companies in the Standard  Poors or Dow Jones Industrial Index, lodging industry profits are growing at significantly slowing rates. However, in 2001 the rate of room supply growth will slow, demand growth will remain robust, and one can presume that capital will look more favorably at the lodging industry at that point,� said Dr. Hanson.

�The first response in the equity markets is likely to be for secondary offerings which are offerings of existing companies; IPOs will follow,� Dr. Hanson added.

PricewaterhouseCoopers Hospitality  Leisure Group provides services including management, technology, human resources and financial consulting in North America, Europe, the Middle East and Africa.