Hospitality braces for a slow year

LOS ANGELES, Jan. 5 (UPI) -- A slowing economy is pushing U.S. hotels to lower rates, which could sharply cut operating income, an industry research group said.

PKF Hospitality Research predicted net operating income would fall 14 percent in 2009 for U.S. hotels, the Los Angeles Times reported Monday.

A PKF report in December said revenue per available room would drop 8 percent this year.

Some high-end hotels are drastically cutting rates. The West Hollywood Sunset Marquis Hotel and Villas slashed two-bedroom villa rates during the holidays from $2,400 to $700 a night, the Times reported.

"September was definitely a point of departure," for the industry, said attorney Jim Butler, who specializes in hotels. "Since Labor Day, business has been falling off a cliff," he said.

Tourism is down, but so is corporate spending. Hotel investment banker Donald Wise at Johnson Capital said "corporate American somehow woke up to the fact that they have shareholders."

After American International Group Inc., executives spent $440,000 in a retreat in September, in spite of the company's publicized financial problems, "suddenly there was an awareness that in bad times you shouldn't be spending money like that," Wise said.