After The Storm - US Hotels Recovering From Toughest Year in Recent Memory.

Business Editors/Travel Editors/Real Estate Editors

NEW YORK--(BUSINESS WIRE)--Jan. 28, 2003

Ernst & Young's 2003 National Lodging Forecast Analyzes

Top 24 US Markets and Predicts the Coming Changes

Last year, on February 4, Ernst & Young's Hospitality Services Group announced its 2002 National Lodging Forecast and called the year the "Perfect Storm" for the hotel industry. The combination of the World Trade Center attack, war on terrorism, drop in the stock market and reductions in corporate travel had joined forces to wreak havoc on the nations battered lodging prices, occupancy statistics and hotel operators across the nation. One year later, the storm was every bit the force to be reckoned with as was predicted. In 2002 hotel operators had to prepare for the worst, cut their expenses, lay off staff, reduce room prices, struggle with falling occupancy rates and generally ride it out until the storm broke. Ernst & Young's 2003 National Lodging Forecast released today analyzes 2002 and predicts the industry's future for 2003.

If 2002 was 'the storm,' then 2003 will be the 'drying out' year according to Ernst & Young. "The worst is now behind us," said report author and Ernst & Young's Hospitality Services Group National Director, Chase Burritt. "In 2002 the mentality was 'batten down the hatches' and make it through with your operation intact. We saw rates across the nation come down as operators tried to find a balance between occupancy and room prices," Burritt added. He believes that 2002 will go down as the worst period for the hospitality industry in the last twenty years, with virtually every national market being negatively affected to some degree.

Burritt thinks a significant rebound for the hospitality industry won't happen until 2004, but that recovery is already beginning to form as room rates and occupancy are slowly moving up. Even though the full recovery is still months away there is a bright spot, as Burritt believes the worst is not only over, but that the operational cuts made to get through 2002 should make hotels even more profitable when the markets do rebound in 2004. "Everybody did what they could to operate more efficiently and tighten up on their costs and expenses to get through 2002. In the long run that will help the bottom line even more as the markets improve," said Burritt.

The report titled, "2003 National Lodging Forecast" breaks down the top 24 lodging markets across the country and analyzes the challenges and opportunities of each one. The report looks at the last two years worth of room rates, occupancy and revenue per available room (RevPAR), a key indicator of how the market is performing, and also makes predictions where the markets are headed for 2003.

Not surprisingly, most markets have made rate adjustments to cope with the reduced demand for rooms and it was the higher-end markets and hotels that often had to make the biggest rate cuts to survive. For travelers, that means there are still some excellent lodging prices to take advantage of across the US. For a predicted price for a hotel room during 2003 in select US markets see chart below:

                  City             2003 Average Room Rate

                  Atlanta                   $79
                  Boston                    $130
                  Chicago                   $111
                  Dallas                    $79
                  Los Angeles               $94
                  Manhattan/NYC             $187
                  Miami                     $102
                  Phoenix                   $95
                  San Diego                 $113
                  San Francisco             $128
                  Seattle                   $101
                  Washington DC             $154

Ernst & Young's report predicts that US RevPAR will increase by approximately three percent in 2003 and that occupancy will run around 60 percent, up only 1/2 a percent from 2002. The lower than normal industry statistics are mainly due to the continued slow economy and reductions in corporate travel that have been then norm since mid-2001.

Of the various hotel segments, Burritt has seen the business and convention scale hotels perform slightly better than the luxury and economy segments in the past 12 months. The difference is mainly due to the fact that luxury and economy travelers have more discretion over when and where they stay, while business travelers are usually locked into visiting certain cities for a specific purpose and often have less flexibility.

The complete report -- "2003 National Lodging Forecast," which includes Ernst & Young's market analysis on original research and numbers compiled by Smith Travel Research, is available for viewing in an electronic flash file: (Call Jason Fanselau at 925/930-9848 or email [e-mail]) Copies can also be obtained by calling Regina DiBenedetto of Ernst & Young at 305/415-1533. For more information contact M. Chase Burritt, National Director, Hospitality Services, 305/415-1650 or mobile [phone].

About Ernst & Young (E&Y) Hospitality Service Group

The Hospitality Services Group of Ernst &Young is considered one of the largest and most effective advisory practices in the world. The Hospitality team is focused on delivering value-added solutions that are focused and quick to implement. Industry authorities for over 25 years, the E&Y Hospitality team provides research and analysis of worldwide industry movements and opportunities. Market research and analysis is just one component of its full range of client services. From lodging to tourism, from finance to operations, the industry looks to Ernst &Young to create value in its coordinated delivery of advisory, tax and audit solutions. The hospitality team covers markets in North America, Europe and Asia.