Welcome mat put out for hotel recovery

November 01, 2003 |

If projections hold true, the five-quarter surge in hotel spending would be the same length and pace as the last lodging market construction recovery in 1995-96. Although construction spending for hotels declined in June and July, activity is up 12% from last December's low point. Spending is forecast to increase at a 15% annual pace from late 2003 through 2004.

Renovation will initially be a relatively high share of spending, but spending for additional rooms will become a relatively high share by late 2004 and into 2005.

Hotel operators have progressively increased both occupancy rates and operating margins since early spring. Each category is back into the normal range after stronger lodging in July and August.

Travel is extremely sensitive to profits for business travel and consumer income for personal travel. Corporate profits are on the rise.

From June to September, airline revenue passenger miles increased more than the typical seasonal average. The pickup in personal travel was the principal cause of the 20- to 30-cent August/September spike in gasoline pump prices.

Profits soared nearly 11% in the 2nd quarter and appear to have increased again in the summer.

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