GlobeSt.com: Any surprises in the data?

Woodworth: Being in the forecast business, it's not easy to admit there are surprises. With that caveat, there are two surprises that come to mind. One is that room rates are coming back at a much quicker pace than we had originally anticipated, which is a consequence not so much of demand growing faster--that's been on track--but that managers have become better at managing inventories and practicing yield management. The other surprise, although it's less of one, is that, while we knew revenues overall were coming back, expenses have begun to grow at a slightly greater rate than we anticipated.

GlobeSt.com: What are the numbers?

Woodworth: In midyear, we saw that, while revenues had increased 7.5%, operating expenses grew 7.3%. Importantly, within that, labor costs grew at a 7% rate. So there was very little gain in overall productivity for the first half of this year, and most troubling is how payroll costs had grown. The aspects of that that are somewhat controllable, salary and wages, increased 6.7%. The big jump was on the more non-controllable aspects of payroll, benefits, which grew at 7.8%.

GlobeSt.com: Are we talking about all product types?

Woodworth: The data concerning the first half is for full-service properties. We didn't have an appropriate sample for the limited side of the equation, but from what we can glean from the data, limited-service properties too were experiencing similar types of increases.

GlobeSt.com: Are we now out of the fears instilled by Sept. 11?

Woodworth: No. But we're getting there. From a top-line revenue perspective, 2005 is the year we will get back to pre-Sept. 11 revenue levels. In terms of bottom-line profitability, we don't see that coming back until 2006 and maybe 2007.

GlobeSt.com: How much of the sector's prolonged slump was not related to the attacks?

Woodworth: There were a number of factors that disrupted normal travel patterns, not only Sept. 11. There was the impending war in Afghanistan and Iraq, the SARS epidemic, and don't forget the decline in the economy. In fact, the industry was already heading south in the first quarter of 2001. The attacks propelled the downward spiral. From '01 through '03, the vast majority of the downturn was more attributable to the fear-of-travel issues than to the overall economy.

GlobeSt.com: What about development potential? Will we fall into the same old patterns?

Woodworth: Largely, yes. But the timing and length of the cycle to get back into those patterns will be somewhat more protracted. Remember, as I said before, it will be another year before the bottom line returns. All the while, construction costs will continue to go up, so the market values of hotel real estate are still not back to replacement levels.

GlobeSt.com: Which means for opportunistic investors, now's the time to buy.

Woodworth: It's a wonderful time to buy, and the market is confirming that, given the level of activity we see.