Economic Analysis of the Hotel Industry

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Economic Analysis of the United States Hotel Industry
Background Information Our team chose the hotel industry in the United States for our economic analysis. The hotel business has existed since the earliest times, and has influenced the development of the economy since the founding of this country. According to the American Hotel and Lodging Association, in the year 1900, there were fewer than 10,000 hotels in the US which provided 750,000 to 850,000 rooms. The 2004 figures show that there are 47, 584 hotel properties in the US with 15 rooms or more. There are currently 4,415,696 guestrooms available. The industry had sales of $105.3 billion in 2003, which places average revenue per room at $50.42 with an average occupancy rate
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Mergers and acquisitions are common in the hotel industry. One of the most recent is the acquisition of hotels from CTF Holdings Ltd. (ElBoghdady, Washington Post) This acquisition caused second quarter profits to drop, however second quarter revenue jumped to 2.66 billion up 11% from 2.4 billion in the previous quarter. Marriot reported that revenue per available room rose 11.1 percent, a key measure of a hotel company's strength. Rising demand drove up room rates increasing to 8.9% worldwide and 8.5% in North America. In a call with analysts, Arne M. Sorenson, Marriott's chief financial officer stated," It's been a long time since we have seen demand so strong in so many places and average pricing moving up so quickly." (Washington Post) J.W. Marriott Jr., the company's chairman and chief executive added," occupancy and room rates improved due to accelerating corporate demand, growing group meeting attendance and increasing global travel." (Washington Post)
Demand, Supply, Pricing, and Competitive Strategy As we discussed in class, every business is faced with these issues and they are important to managers making strategic decisions. One of the first things learned about business is that if there is no demand for a good or service, the firm that provides it will not continue to exist. Over time the hotel industry has continued to change with market conditions and make itself attractive to business

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