The U.S. lodging industry continues to benefit from double-digit profit growth in 2006.

According to a recent study, the gross operating profit (GOP) for the typical U.S. hotel increased 13.1 percent from the first half of 2005 to the first half of 2006. However, during this period hotel managers continued to struggle to control such costs as salaries and wages, employee benefits, utilities, and maintenance.

This analysis is based on data presented in the recently released 2006 mid-year edition of Trends in the Hotel Industry published by PKF Hospitality Research (PKF-HR), an affiliate of PKF Consulting.

"Due to the strength of the economy, U.S. hotels posted healthy increases in occupancy and room rates during the first half of 2006," said R. Mark Woodworth, president of Atlanta-based PKF-HR. "Given where the lodging industry is in the business cycle, the strong gains in room rates were expected, and the sustained growth in occupancy augurs well for continued profit growth. While the resulting 9.7 percent gain in total revenue is certainly welcome, it is the 7.8 percent increase in operating expenses that concerns hotel owners and operators."

The PKF-HR 2006 mid-year edition of Trends in the Hotel Industry presents detailed revenue and expense data for both full-service and limited-service hotels for the periods January through June of 2006 and 2005.

Total hotel revenue grew 9.7 percent during the first half of 2006, the result of strong sales in most operating departments. The survey sample averaged a 1.9 percent gain in occupancy, along with an 8.5 percent increase in average room rates (ADR). The net result was a 10.6 percent boost in rooms revenue, the main driver of total revenue. Hotel operating expenses grew an average of 7.8 percent during the first half of 2006. This is more than twice the 3.8 percent U.S. inflation rate recorded during the same period.

Total operated department expenses grew 6.7 percent in the first six months of 2006, compared to a 9.5 percent growth in undistributed department expenses. Undistributed department costs, such as administration, marketing, maintenance, and utilities, are typically viewed primarily as fixed expenses. In other words, they do not vary as much with business volume as the expenses in the rooms, food, and beverage departments.

Through the first half of 2006, limited-service hotels enjoyed greater gains in revenue and profits compared to full-service properties. During the first six months of 2006, limited-service revenues grew 11.1 percent, which resulted in a 17.7 percent gain in GOP. Concurrently, full-service hotels saw their revenues grow 9.5 percent, while enjoying a 12.4 percent increase in profits.

Due to the impact of Hurricane Katrina on industry performance during the fourth quarter of 2005, as well as a moderation in the nation's economic growth, PKF-HR is expecting a slight slowdown in the pace of performance gains during the later part of 2006.

"The lingering Katrina and economic impacts on lodging industry performance during the fourth quarter of 2006 will result in annual revenue and profit gains somewhat less than those achieved during the first half of the year. However, PKF-HR is still projecting that 2006 will mark the third consecutive year of double-digit profit growth for U.S. hotels," Woodworth said.