Occupancy Shows Less Steep Decline; Rates Still Dropping

NEW YORK—UBS Warburg reports that its research shows weekly occupancy declines have moderated during 2002. Reasons for this moderation has occurred because the first quarter of 2002 is benefiting from pent-up demand from late 2001. Meanwhile, year-over-year comparisons will become easier as the year progresses, since the decline in business travel began February 2001. While occupancy rates are seeing less a less steep decline, however, room rate declines are holding steady, according to the firm. The reason for the steady decline is due to there not being enough demand, particularly, from weekday business travelers, to allow hotels to hold prices steady in order to maintain market share, said the report. UBS Warburg said it expects declining to flat year-over-year rate trends to continue this is year until business travel demand accelerates. The firm expects business travel demand should begin improving in late 2002, said the report, which said that forecast is based on the fact that its corporate travel consulting contact has informed them that in the past, “business travel restrictions are typically lifted after corporate profits began to improve.” Moreover, UBS Warburg’s Investment Strategy team is forecasting that S&P 500 Operating Profits will begin to increase year over year in he third quarter of 2002.