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Less room at the inn: Hotels in U.S. raise rates as travel picks up

The Hyatt (L) and Marriott hotels are pictured next to the Embarcadero Marina in down town San Diego, California November 6, 2013. REUTERS/Mike Blake

By Ankit Ajmera and Sweta Singh

(Reuters) - Guests checking into a hotel run by one of the top chains in the United States can expect to pay 5 percent more this year than last as a brighter economy pushes occupancy to record highs.

Hyatt Hotels Corp (H.N) on Tuesday joined Hilton Worldwide Holdings Inc (HLT.N), Marriott International Inc (MAR.O) and Starwood Hotels & Resorts Worldwide Inc (HOT.N) in forecasting that group bookings would drive growth this year.

"Groups are booking more in advance now because they feel they have a better line of light at the future economic outlook," said Lauro Ferroni, head of hotels and hospitality research at property consulting firm Jones Lang LaSalle.

Occupancy rates at more expensive hotels are expected to hit 65.1 percent in 2015 - their highest ever - as travel spending in the United States grows 5.2 percent, according to statistics firm Statista. (http://bit.ly/1GYEjb6)

"If you know you are going to sell out and you are waiting to sell those last two rooms you know you can charge almost anything for those rooms," said David Loeb, an analyst at brokerage Robert W. Baird.

Room rates are expected to rise by an average 5.3 percent this year, compared with 4.5 percent last year, according to PKF Hospitality Research.

Marriott, whose room rate averaged $143.27 in North America last year, expects an increase of nearly 5 percent in 2015, spokeswoman Laura Paugh told Reuters.

Hilton, Hyatt and Starwood did not respond to emails seeking comment on their rate expectations for the year.

Room rates are expected to account for nearly three-quarters of the growth in revenue-per-available-room (RevPAR) this year, up from 55 percent from last year, said Mark Woodworth, senior managing director at PKF.

RevPAR is calculated by multiplying a hotel's average daily room rate by its occupancy rate.

The question for the industry is whether higher prices will hurt occupancy rates in the longer term. Woodworth expects a 1.2 percent decline in occupancy between 2016 and 2017.

But for now, hotels have room to raise prices.

"We continue to grow average daily rates as demand from both group and transient guests continues to be strong," Hyatt Chief Executive Mark Hoplamazian said on an earnings call on Tuesday.

The Dow Jones U.S. Hotels Index (.DJUSLG) has risen 5.5 percent so far this year, outperforming the S&P 500 index, which has risen 2.7 percent (.SPX).



(Editing by Sayantani Ghosh and Ted Kerr)