Average daily room rates in the Los Angeles area are expected to climb a healthy 4.5% next year to $126.50, according to a new forecast by the LA office of San Francisco-based PKF Consulting, following up a strong 5.6% increase in 2000 and an even better 9.4% hike the year before. Occupancy is expected to reach 76.2%, up from 75.8% this year and 73.6% in '99.

"Hoteliers have been able to successfully push the average daily rate, which continues to climb faster than the rate of inflation," says Bruce Baltin, SVP of PKF's Downtown office. Those strong gains are a far cry from the early 1990s, when occupancy dropped and room rates fell due to the recession and a "stay-away" attitude among travelers in the wake of the 1992 riots.

With land for big new projects scarce, Baltin and other experts say many hoteliers will focus on renovating their existing properties next year. Demand for rooms in well-located areas remains strong, and owners can often raise rates dramatically after a major rehab has been completed.