Hotels' temporary cutbacks could linger

Tourism may be struggling back to normal, but hotel managers have not restored all the cost-cutting imposed after the terrorist attacks of 2001.

In fact, industry expenses remained down so much in 2002 that the hotel industry's break-even occupancy rate plunged to a record low of 47.4 percent, according to PricewaterhouseCoopers. Compare that with an industry average of more than 60 percent occupancy required to break even in 1995.

Without cost-cutting, hotel industry profits would have been $13.6-billion in 2002, instead of an estimated $16.1-billion.

Hotels, however, are flirting with trouble unless they restore spending in many areas.

"Some of the cost reductions initiated in 2001 and 2002 will become institutionalized," said Bjorn Hanson, director of PricewaterhouseCoopers' hospitality practice. "But some can only continue for a limited time or they will increasingly affect the quality of facilities and guest service."

In particular, he cited sales and marketing staffs that remained shrunken last year in 40 percent of all hotels. Reduced staffing and working hours in other departments remain in effect in 60 percent of hotels.

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