According to a presentation based on information by the Pinnacle Advisory Group and given by the Massachusetts Lodging Association, occupancy rates for Boston and Cambridge at the end of 2000 were 78%. By the end of 2001, that number fell to 69.6%. At the same time, average daily room rates dropped from $199.74 in 2000 to $182.91 in 2001. By the second quarter of this year, occupancy was up 3% but average daily rates were still down about 13%.

In the suburbs, occupancy rates plummeted from 73.3% at the end of 2000 to 61.3% at the end of 2001. Average daily rates for the area dropped from $111.15 at the end of 2000 to $108.43 at the end of 2001.

"Things are really tight," Art Canter, executive director of the Lodging Association, tells GlobeSt.com. He points out that historically, 40% of Boston's market mix is corporate and the economic struggles are affecting that market as well as the Route 128/Route 495 market in the suburbs because of its heavy concentration of high tech companies. Ironically, Canter notes that once you leave the Greater Boston area and start heading towards the Berkshires, the market begins to pick up.

"Boston is a fly market," he says, pointing out that international travelers tend to round out the market here, a group that is also underrepresented recently. Internet-driven leisure travelers are taking the place of these other travelers and they tend to be more value conscious. "Hotels are barely covering operating costs," says Canter. "It's very quiet."

As Canter further points out, the struggling hotel market has implications far beyond how many rooms get filled. The ripple effect extends to retail stores, restaurants, cabs, buses and other local businesses. But there is hope. Canter says that business is supposed to start picking up in the spring of 2003, which he anticipates will impact the international traveler--who stays longer and spends more money--as well.

The situation is complicated by the number of new hotel rooms expected to come online in 2003. In Boston and Cambridge there will be a 5.5% increase in hotel development next year, with six new hotels and the refurbished Ritz reopening. In addition, there will be several new hotels opening up in the suburbs. Still, Canter says that forecasts predict a 1% decrease in 2003 occupancy rates for Boston and Cambridge, due mainly to the new development, while it is anticipated that the suburbs' occupancy rates will increase to 64.8% in that year.