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ATLANTA-Nine consecutive quarters of declining lodging demand should come to an end in the second quarter of 2010, predicts locally based PKF Hospitality Research. But there’s a catch: Discounts on nightly rates have taken a firm hold on hotels, affecting room revenue through next year.

Luxury and upscale hotels, along with midscale hotels that don’t offer food and beverage service, are expected to see more customers coming back by the last three months of this year, says Mark Woodworth, president of PKF Hospitality Research. Midscale with food and beverage won’t see improved performance until next year’s third quarter, he adds.

“While the price paid for the room will remain the most important criteria for most travelers in 2010, the value received will once again factor into the buying decision,” Woodworth says. “Higher-priced hotels have suffered the greatest erosion in pricing power during this protracted contraction and, as a result, offer an abnormally strong value proposition.

All but five of the 50 hotel markets monitored by PKF will experience stronger demand next year, Woodworth predicts, though supply increases remain an issue for half those markets, causing thinning occupancy. The lagging markets include Fort Lauderdale, Miami and Tampa, FL; Indianapolis, IN; and Washington, DC.

Movement in a hotel’s occupancy and average daily rate from one year to the next depends largely on its overall local market, according to Jack Corgel, PKF’s senior advisor and a real estate professor at Cornell University’s School of Hotel Administration. “The person in charge of the hotel knows when rooms will come in and out of service, when renovations occur and when competitors open across the street,” Corgel stated in the research report.

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