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PHOENIX-New hotel construction has dropped by almost 30% and the sale of existing hotels have dipped to its lowest level in more than 12 years, but that trend may be on the verge of reversing as a shaky economy begins to level off.

“It’s not quite a seller’s market yet,” Patrick Ford, president of Lodging Econometrics, the research division of National Hotel Realty, tells GlobeSt.com. “But there’s pent-up money waiting to be put to work and we’re seeing companies starting to prune their portfolios so that’s an improvement.”

But don’t expect a heavy influx of hotel trading anytime soon. Ford predicts there won’t be much change in the industry in the next year, but it should show signs of dramatic improvement by 2004.

Much of that improvement, however, hinges on an economic upturn. “For hotels to get healthy, the economy has to get healthy,” said Ford, noting that the sale of existing hotels have dropped to its lowest rate in more than 12 years in 2002. But, he said, more hotels and motels are coming on the market, indicating that a reversal is under way.

“When things improve, they will improve handsomely for the hotel industry,” said Ford,who was among 400 hotel owners, operators and suppliers at the 2002 Lodging Conference, a four-day conference being held at Phoenix’s Arizona Biltmore Hotel.

Despite the current economic crunch, few owners are hanging out the “for sale” sign, Ford’s son, Bruce, a vice president of sales with Lodging Econometrics, tells GlobeSt.com. “Sellers are not as distressed as many people thought they would be,” he said. “There haven’t been as many foreclosures and as a result, there aren’t as many properties on the market.”

Instead of selling their ailing investments, hotel owners are taking advantage of low interest rates to refinance, living off their cash reserves, or in some cases, doing well enough to weather the economic downturn, he noted.

The industry is still grappling with the after-effects of the tragic events of Sept. 11. Many hotel construction plans were scuttled after the terrorist attacks, dropping from around 900 new starts to about 610 this year.

But, hotel owners say things are slowly improving in the year since the attacks. Hotels and motels within driving distance of a traveler’s home are showing increased weekend room rentals, Mark Williams, with Best Western International Inc., tells GlobeSt.com. Destination resorts, however, are still suffering as the public continues to balk at traveling by plane.

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