New construction is increasing the number of hotel rooms by an impressive 10 percent in 16 U.S. cities. Some analysts predict prices will begin to come down when hotels can't fill all those new rooms

Laws of supply and demand

Hotel construction boom makes rooms cheaper, more accessible

(CNN) -- When planning a business trip -- or any trip for that matter -- finding a hotel room in a major city can be a tough assignment. Five million more hotel rooms were booked in 1997 than in 1996 -- the biggest annual increase the hotel and electronic distribution network has ever reported.

But recent studies indicate that hotel occupancy rates are starting to go down.

"1998 is turning out to be a transition year for the lodging industry," said Bjorn Hanson of Coopers & Lybrand Lodging Research Network, which conducted a study. "After seven consecutive years of occupancy increases we are going to see occupancy in all five price points, price segments decrease this year."

Translation: it should be easier to find a room at hotels in all price categories from luxury to budget.

Industry analysts at Bear, Stearns and Company say it's simply a matter of supply and demand. New construction is increasing the number of hotel rooms in 16 U.S. cities by ten percent this year. At the same time, the number of people looking for a room isn't on the rise.

"What we've seen is demand growing at three and a half to four and a half percent in some recent years," said Hanson. "This year it will only grow about two and a half percent."

Some hotel officials say the change is temporary.

"Occupancies overall will probably be down a little bit because of the building boom that is occurring in some of the segments," said Bill Fisher of the American Hotel and Motel Association, "but the average rate probably will increase."

But any drop in demand or occupancy could help travelers' budgets.

"We predict, a year or two down the road, that there will be a higher supply of hotel rooms," said Bob Diener of the Hotel Reservations Network. "And a higher supply means lower occupancy, and a lower occupancy means there should be better rates for the consumer."

Based on a report from CNN's Business and Travel and Beyond. The segment appears weekdays on Early Edition at 7 AM (ET) and on Morning News at 10 AM (ET).

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Related sites:

• Coopers & Lybrand Lodging Research Network
• American Hotel and Motel Association
• Hotel Reservations Network

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