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ATLANTA-The hospitality industry is expected to experience a modest slowdown in 2008, according to a PKF Hospitality Research report. For the year, PKF is projecting occupancy levels to decline slightly by 0.7% while average daily room rate will grow by 5.3%. The net result will be a 4.5% gain in RevPAR, the slowest pace of RevPAR growth since recovering from the 2001 to 2003 industry recession.

While the PKF forecast calls for slowed growth, the rate is still above the Smith Travel Research long-term average of 3.4%. The findings of the report were issued in the fourth quarter edition of Hotel Horizons, the quarterly lodging report produced by PKF.

“Given the cyclical nature of the lodging industry, a slowdown in performance does not come unexpectedly,” says PKF Hospitality Research president Mark Woodworth, in a released statement. “Hotel construction activity is picking up and will cause a modest imbalance between supply and demand.”

The report says that although the total number of new hotel projects is at an all-time high, the number breaking ground is small due to high costs of construction and land, and firmer capital market discipline. In many cases, renovation projects are more feasible than new construction. “Given our analysis of current hotel construction activity, PKF is forecasting a 2.6% increase in lodging supply in 2008, or approximately 115,000 new hotel rooms,” Woodworth says. “This is the greatest annual supply increase since 2000, but still less than the 150,000 new rooms added in both 1998 and 1999.”

PKF is forecasting an 8.5% increase in the bottom line of the average US hotel in 2008. Of concern for hoteliers is the rise in the cost of operations. While total revenues are forecast to increase by 5.3%, hotel operating costs are projected to rise 4%, nearly double the expected pace of inflation.

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