E&Y Annual Lodging Survey Sees Continued Warming Trend for Hospitality Sector; Increased Room Rates and Occupancy Only a Part of the Big Picture

Business Wire, March 31, 2005

NEW YORK -- The housing sector may face cooler weather ahead as interest rates rise, but the hotel sector is expected to continue a warming trend, according to a new lodging survey report by Ernst & Young.

In its newly-released annual market evaluation focusing on domestic development and investment in the hospitality sector, E&Y's real estate support group says there are 10 good reasons to watch for the continued ascendancy of the hospitality sector:

--With return rates much healthier in recent years, the traditional public sector hospitality powerhouses -- name brands, real estate investment trusts and opportunity funds -- have been joined by a cadre of high-end private investors and smaller investment pumping capital into the sector.

--Continuing improvement in lodging fundamentals has also resulted in more investor interest in hospitality stocks.

--The fact that hotel rooms are not being built because of limited financing (decreased supply) has actually made the sector healthier than it has been in years (increased demand).

--Baby boomers are looking for timeshares and fractional ownership, developers are warming up to increased investor equity capital and new projects have the best chance to be developed if they are a part of a mixed-use approach.

--Condominiums are no longer just for primary housing. With current interest rates, condos that meld into resort and retirement concepts are by far the most in demand product.

--Building large convention center and meeting room complexes is no longer the guaranteed business meeting lure it once was for smaller markets. Meeting planners are favoring destinations that offer the variety of options now demanded by convention-goers.

--Increased demands for financial reporting and compliance systems have required a lot more leadership focus. The private sector is closely watching as many feel the new reporting procedures will eventually be enforced with them as well.

--Improved occupancy and increased rates are more than being matched by higher costs. Insurance rates have doubled in only three years, at least partially because Mother Nature has taken a bigger than usual toll on the Southeast.

--Recent union consolidations threaten to move labor issues to the ultimate front burner in coming years. Strikes and work stoppages could derail the recovery if not handled correctly.

--The dollar may be anemic, but increased corporate and inbound foreign travel to the US has some cautiously optimistic. That optimism could be tempered by increased travel limitations and US image problems abroad.

To view Ernst & Young's 2005 National Lodging Report: http://www.gallen.com/eykl/NLR_2005_locked.pdf

To view Ernst & Young's Hospitality Industry Top Ten Thoughts for 2005: http://www.gallen.com/eykl/TopTenThoughts.pdf

For further information: http://www.ey.com/us/reas