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Room Pricing Becomes Main Driver for Hotel Sector; Consumers Move Online

Jan. 23, 2003

The downturn in the U.S. economy hit hotels hard this year with occupancies near all time lows. Pressure on profitability has been greatest at the limited service level – due to the high level of competition – and luxury hotels, chiefly because of their prices. Look for more re-flagging of hotels in the year ahead as the industry shakes out. While most hotel operators have already pared costs back to the bone, consumers are reaping the benefit of sector-wide price-cutting. Price is now the all-determining factor for most business and leisure travelers and the challenge for operators is to find the right price point to keep hotels profitable and, most importantly, preserve their brand for the future. The Internet has become critical to the industry with more consumers surfing for room rate bargains on discount hotel sites and on websites of major chains, most of whom offer Internet specials. One market that doesn’t seem to be suffering: Las Vegas where more than $3 billion in construction is underway.This information was supplied by Ernst & Young (www.ey.com) and excerpted from the companies’ Annual State of the Real Estate, Hospitality, and Construction Industries 2003 Report.