The recessionary environment that persists in all four corners of the United States through the first quarter of 2009 has set the stage for what will be a record year of contraction for the domestic lodging industry. According to Smith Travel Research (STR), the average U.S. hotel achieved an occupancy level of 51.4 percent through first quarter 2009, a 10.9 percent decline compared with the 2008 level of 57.7 percent. The ill effects of these weak demand conditions are being amplified by the scale of new hotel openings, which represented a 3.2 percent net increase in available supply in the first quarter. Inventory levels will likely grow by 2.6 percent for full year 2009, well above the 20-year average of 1.9 percent as reported by STR.

The forecasts released by PKF Hospitality Research (PKF-HR) in March of 2009 reveal that this disconnect between the property cycle (above-average supply growth) and the business cycle (demand is contracting) will likely result in a 13.7