Hotel industry prepares for worst of times

Hotel industry fortunes fell hard at the end of 2008, and the prospects for 2009 look grim as Americans cut travel spending and leave plenty of room at the inn.

Hotel operators have seen room reservations fall drastically as business travelers and vacationers cut down on trips. In 2009, U.S. hotels will suffer one of the greatest annual declines in occupancy and revenue in history, according to analysts.

In their suffering, however, many hotels will give travelers a break by lowering prices or offering incentives, such as free meals, in hope of enticing more business.

"We just get creative," said Mehdi Eftekari, general manager of the Four Seasons Hotel in Los Angeles, where, he says, occupancy is down slightly. Incentive packages might include a free breakfast, car rental or spa treatment with room rental. "We know that people have scaled back," he said. "The first-class traveler is traveling coach. The suite buyer is scaling back to a standard room."

The Four Seasons doesn't plan to lower room rates, but many others are. Analysts at PKF Hospitality Research predict net operating income will be down 14 percent at U.S. hotels in 2009, driven in part by room-rate reductions.