Signs of Improvement for Global Hotel Industry

20th Jan 2004

Today at the Americas Lodging Investment Summit (ALIS)
Deloitte and Smith Travel Research shared the platform to reveal year-end
performance data for the global hotel industry.  US data was presented by
Randy Smith, CEO of Smith Travel Research, whilst international data was
presented by Marvin Rust, partner for HotelBenchmark at Deloitte.
The data shows that while 2003 proved to be another tough year for the hotel
industry, with the war in Iraq and outbreak of SARS compounding the already
challenging operating environment, some markets began to show signs of
recovery. In US dollar terms Europe was the best performing region with
revPAR improving 10%.  However, this growth was fuelled entirely by an
increase in average room rate, which is attributable to the weakness of the
US dollar to the Euro. In fact when measured in euros, the European market
came under significant pressure with revPAR falling 8% as average rates came
under pressure in most markets across the region.
Encouragingly, despite the
troubles in the region, hotels in the Middle East also managed to report
positive revPAR growth, with revPAR increasing 6% compared to 2002.  This
improvement in performance was entirely driven by growth in average room
rate, whilst occupancy levels remained stable.  Countries such as Kuwait and
Qatar benefited from demand from the military and journalists during the war
and then subsequently from corporations involved in the rebuilding of Iraq.
Consequently revPAR in Kuwait was up 80% as occupancy leapt from 49% to 85%.

The spring outbreak of SARS severely hampered performance of hotels across
Asia, particularly those in China, Hong Kong, Singapore and Taiwan. At the
height of the SARS epidemic hotels in these countries were reporting single
digit occupancy and as a result revPAR in many of these markets has fallen
by over 20%.  However, the region has proved resilient and bounced back
strongly resulting in overall revPAR for the region falling just 2% for the
year.  Encouragingly, Asia’s hoteliers have not entered in price wars during
this period and so have managed to improve average room rates by 5%, however
this growth has been offset by the 7% fall in demand.

After being the only region of the world to report negative revPAR growth in
2002, the US market picked up to end the year with revPAR up just 0.4%
compared to 2002. While this is only marginal growth it may signal a period
of prolonged growth.

Marvin Rust, partner for HotelBenchmark at Deloitte said: “Although the 2003
trading numbers are disappointing, we are encouraged that there are signs
that a recovery is underway in some markets.  However, we anticipate that it
will take until 2006 before the levels of performance seen in 2000 are
matched again.”

Commenting on the outlook for the US market, Randy Smith, CEO Smith Travel
Research added: “With all economic indicators pointing to vibrant growth in
2004 we expect the lodging industry to benefit with measurable growth in all
key indicators.”



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