It’s official--2004 was a very strong year for the hotel industry. Smith Travel Research reports that industry occupancy hit 61.3% at the end of 2004, a 3.7% increase over year-end 2003. Average room rate increased 4% to $86.41 while revenue per available room (REVPAR) increased by 7.8% to hit $52.93.

"Industry operating performance was very good in 2004. Good growth in group demand helped fuel the industry’s gains," says Mark Lommano, president of Smith Travel Research.

Lommano expects 2005 to be another strong stretch for the industry. The minimal growth of new room supply will help while occupancy should also continue to climb. Industry room supply only grew by 1% in 2004 while demand—as in room nights sold—gained 4.6%. Room revenue for full year 2004 rose by 8.8% to reach $86.2 billion. Industry occupancy reached 56.9% by the end of 2004, an increase of 3.5% versus fourth quarter 2003. Lommano also believes that room rate increases will drive REVPAR growth this year.