September 10, 2009
By Sarah Nassauer

Hotel occupancy will likely gain strength in late 2009 and 2010, but profit will remain elusive as hotels continue to use heavily discounted rates to draw in more travelers, according to a revised U.S. lodging forecast from PricewaterhouseCoopers due out Thursday.

The revision shows revenue down 16.1% in 2009 and flat revenue in 2010, compared with the company's June forecast of a revenue decrease of 15.7% in 2009 and a slight increase in 2010 revenue of 1.6%.

While the occupancy forecast for 2009 is slightly stronger than the company predicted in June, it comes at the expense of room rates, says Scott Berman, hospitality and leisure industry analyst for PricewaterhouseCoopers. Occupancy is expected to come in at 55.5% in 2009, up from the June forecast of 55.1%. 2010 occupancy is forecasted at 56.1%.

"While the beginning of the recovery for hotels is expected to be primarily demand driven, as the recovery gains momentum, rate strategies implemented by hotels will have an increasingly important role in the magnitude and speed of this recovery," the company said in a statement. The average daily rate charged by U.S. hotels will be down 1.1% in 2010, according to the forecast. In June PricewaterhouseCooper forecasted a smaller drop in average daily rates of 0.2%.

But PricewaterhousCoopers's prediction of flat revenue and a slight decrease in rates during 2010 is somewhat bullish compared with other recent forecasts.

Smith Travel Research expects U.S. hotel revenue to be down by 17.1% in 2009 and down by 4% in 2010. STR reiterated the firm's 2009 and 2010 forecasts Wednesday in a release.

"We are just not seeing some of the indicators we would like to see tick up," to be more positive says Chad Church, an analyst at Smith Travel Research. STR will "however, be looking very closely at September results to see if there is anything unexpected, particularly in the group and business transient demand numbers," says Mark Lomanno, president of STR.