This Just Inn: Hotel Profits Will Rise, as Will Vacancies

Although the last couple of years have been good ones for the nation’s innkeepers, U.S. hotel occupancy is expected to dip just a bit in 1997, thanks to a spurt of new hotel construction, according to a just-released study by Coopers & Lybrand L.L.P.

The firm forecasts nationwide hotel occupancy will average 65.9% in 1997, down slightly from the 66% level expected this year. The hospitality consultants expect occupancy to keep dropping to 65.7% in 1998 and 65.6% in 1999.

Now for the good news. Despite declines in occupancy, nationwide hotel revenue and profits are expected to increase because travelers’ demand for rooms is still growing at a healthy clip and innkeepers are commanding higher prices for their rooms.

Still, it’s a sign that developers and lenders shouldn’t go hog wild constructing new hotel rooms, particularly when the industry is still catching its breath from the last recession, says Michael Mahoney, director of hospitality consulting services for Coopers & Lybrand in Los Angeles.

“Right now the growth in demand for rooms is higher than the growth in supply,” Mahoney said. “But the industry should take this as a warning not to overbuild.”

Mahoney says California has seen a much lower level of new hotel construction than other parts of the country because it was the last region to come out of the downturn and is still burning off the last of its stockpile of excess rooms.

He expects statewide occupancy to be flat and California’s industry profits to be up in 1997.

*

Marla Dickerson covers tourism for The Times. She can be reached at (714) 966-5670 and at marla.dickerson@latimes.com