Markets that may be hit the hardest are Boston, Dallas, Honolulu, Los Angeles, Miami, Phoenix and Seattle.
Until the turnaround occurs, occupancies at full-service hotels will average 63.5% and at limited-service properties, 60.9%, the lowest levels since the 1991 Gulf War. The industry generally considers 65% occupancy as the break-even point at most properties.
"Hotels are currently being hit with a one-two punch," Dr. Jack Corgel, managing director of applied research at HRG, says in a prepared statement. "In addition to the current recession, the hotel market is enduring a stigma brought about by the current fear of travel."
Full-service hotels will be hit hardest. Guest demand will be a negative 9.8% among the full-servicers; and a negative 5.8% in the limited service sector.
"These declines in demand related to the stigma effect will largely dissipate over the next two years," Corgel predicts.
Based on guest demand during the Gulf War 10 years ago, the researcher says "the most significant and visible effect" for hotels will be RevPAR. "The impact on profits will vary substantially by property type, local market area and net levels of accommodated demand," Corgel says.
RevPAR declines for limited-service hotels will be 9.1% and 13.3% for the third and fourth quarters of this year versus the same 2000 periods. A further reduction of 14.5% is forecast for first quarter 2002.
For full-service hotels, RevPAR will shrink by 18.4% and 20.4% in the third and fourth periods of this year. Second quarter 2001 saw a decline of 6.2%.
Hospitality Research Group is the research affiliate of San Francisco-based PKF Consulting.
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