Occupancy rates improved in the U.S lodging industry last year, despite a small decline in average room rate. Smith Travel Research reports that average industry occupancy was 59.2% in 2003, which represented a 0.2% increase over 2002. Meanwhile, average room rate declined 0.1% to $83.28. RevPAR, or revenue per available room, also rose by 0.2% to $49.34.

"Industry operating performance began to gain traction in the second half of 2003. We expect this momentum to continue in 2004," says Mark Lommano, president of Smith Travel Research. "Healthy demand growth combined with continued moderate room supply increases should strengthen occupancies and help operators increase room rates." Lommano adds that this optimistic forecast assumes steady improvement in the U.S economy.

New supply increased by only 1.3% between 2002 and 2003. And demand, as measured by room nights sold, held its own, gaining 1.6% last year.