Highest hotel occupancy in 20 years expected, but rates going up too

U.S. hotels are on pace to report the highest occupancy level in 20 years, an industry study says, as the economy rebounds and travel demand strengthens.

The downside -- higher room rates.

Hotel occupancy levels will rise to 64.1% in 2014 and 64.8% next year, the highest level since 1995, according to a lodging forecast from PwC, formerly known as Price Waterhouse Coopers.

Daily room rates are also expected to rise, by 4.4% in 2014 and 5.7% next year, the study said.

Demand continues to grow among leisure travelers and groups attending conferences and meetings, the PwC report found.

“The strengthening of the group segment thus far in 2014 and a strong summer travel season across all price points is encouraging for future occupancy levels and continued industry growth,” said Scott D. Berman, an industry leader for hospitality and leisure at PwC.

The forecast signals just how strong the rebound has been for the hotel industry, which was brought to its knees by the recession. Hotel occupancy rates dropped to about 55% in 2009, forcing some hotel managers to turn to unusual promotions to draw in guests.

During the recession, hotels in Southern California offered discounts on tattoos, free rentals of Harley Davidson motorcycles and a BMW convertible.

At the Wilshire Grand Los Angeles, summer room rates were tied to the high temperature in downtown Los Angeles. (If the downtown temperature reached 87 degrees, the overnight rate was $87.)

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