Better Times Ahead for Denver Hotel Market

That's because another 116,000 available room nights were added to the market last year, explains Montgomery, president of Denver-based Horwath Horizon Hospitality Advisors LLC/Montgomery & Associates. "While the area is starting to experience a turnaround, the national, regional and state economies, along with the lingering effects of Sept. 11, have taken a significant toll on the hospitality industry over the recent years (2001 to 2003)," according to Montgomery's report.

He says the beginning of the turnaround in the economy and the lodging market didn't start until mid- to late-2003, six months to a year longer than what many observers anticipated.

"The future, due to a variety of factors, has some hotel owner/operators and potential lodge developers, feeling somewhat more positive, yet still somewhat apprehensive, about anticipated market conditions in metro Denver," according to Montgomery. "Most believe the metro Denver lodging market still holds a great deal of potential," he says.

But there are still three big questions lingering:

• When will the recession truly end?

• Will the recovery that began in mid-to-late 2003 continue into 2004?

• When will the commercial traveler return to the marketplace?

Montgomery notes that the Denver-area hotel occupancy rate was 68.2% at the end of 2000, before it nose-dived in 2001, 2002 and 2003. "A significant portion of this decrease continues to reflect the national, regional and state recession," says Montgomery.

He notes, however, the 116,000 available room nights represents about 317 new guest rooms, about a 1% increase in the lodging supply and the smallest increase in supply in many years. Each new room equates to 365 available room nights.

"It is our belief that this percentage occupancy level will improve in 2004 and then continue to climb in the upcoming years," Montgomery says. "New hotel construction activity has slowed. While the market should see many fewer new hotel rooms hit the marketplace in the upcoming years, lodging demand should continue to grow, which should have a positive impact on the area's occupancy level."

Meanwhile, the average room rate in 2003 fell to $86.28 from $86.09 in 2002. The drop in room rate is similar to declines in many markets across the country, he says.