2010 Will be a Tough Year for U.S. Owners and Operators

2010 U.S Lodging ADR Now Forecasted by PKF at Minus 1.5% from 2009 ADR

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. December 16, 2009

DECEMBER 15, 2009 - PKF Hospitality Research (PKF-HR) today announced that, according to its December 2009 edition of Hotel Horizons®, the pace of recovery of the U.S. lodging industry has accelerated from previous expectations. Improving industry data for such key indicators as occupancy, RevPAR, and demand suggest that the recovery will arrive a full quarter earlier than the firm expected in September 2009. These improvements are reflected in the firm's updated forecasts for 2009 and 2010 in its just published December issue of Hotel Horizons®.

“Make no mistake about it, 2010 will continue to be a tough year for U.S. hotel owners and operators,” said R. Mark Woodworth, president of PKF Hospitality Research. “We are forecasting that, on average, properties will continue to suffer year-over-year declines in revenue and profits from an already dismal 2009. However, given the deceleration of room rate discounting that we observed during the third quarter of 2009, we believe the severity of the losses incurred in 2009 and 2010 will be less than previously forecast. In addition, year-over-year growth in important measurements, such as occupancy, RevPAR, and demand, will be realized a full quarter earlier than we were thinking three months ago.”

As forecast in the September 2009 edition of Hotel Horizons®, the decline in average daily room rates (ADR) reached its cyclical low point in the third quarter of 2009. However, the magnitude of the ADR decline at its turning point was lower than anticipated, thus providing some credence to the firm's future outlook.

According to Smith Travel Research, ADR for U.S. hotels declined 9.8 percent in the third quarter of 2009 (3Q09) compared to the same period in 2008. This is a U.S. Lodging Recovery Accelerated 2 December 14, 2009 full 2.2 percentage points better than was forecast by PKF-HR earlier this year. Concurrently, the national occupancy level declined 7.9 percent, a near match to the 7.8 percent drop forecast by PKF-HR. The net result was an actual 16.9 percent decline in RevPAR during 3Q09, roughly two points less than PKF-HR's projected decline.