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Smith Travel Research and Deloitte Report

Signs of improvement for global hotel industry – 2003 hotel data suggests that a recovery in the global hotel industry may be starting

Today at the Americas Lodging Investment Summit (ALIS) Deloitte and Smith Travel Research shared the platform to reveal year-end performance data for…

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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