The decline in occupancy over the last year and a half is attributed to an increase of 3.5% in the number of hotels as well as a drop of 500,000 guests, to 8.2 million, as compared to the first six months of 2000. Occupancy and room rates will improve as new supply is absorbed, the economy revives and hotels refocus their marketing on small group meetings and leisure travelers, according to PricewaterhouseCoopers.

Sean Hennessey, director of PricewaterhouseCoopers' hospitality and leisure practice, notes that despite the downturn in business, New York hotels have not made concessions on their prices. "This will make it easier for the hotels to enhance revenues next year as market conditions improve," he says. "However, room rate growth will be much slower than in recent years because of the price sensitivity of leisure travelers and the restricted travel patterns of traditional corporate travelers," he adds.

During the first five months of the year, the city room rates and revenue per available room here ranked first in the 25 metropolitan areas tracked by Smith Travel Research, Hendersonville, TN. PricewaterhouseCoopers recently formed a partnership with the firm.