• The direct disruption of economic production caused by recent events is anticipated to reduce third-quarter GDP alone by $24 billion.

• Consumer Confidence in the economy decreased 16.4 points in September � the biggest 1- month drop since October 1990.

• The hotel industry could lose as much as $2 billion as a result of recent events and their detrimental impact on consumer confidence, the economy,and air-travel.

• Preliminary reports have suggested that the lodging industry may be forced to layoff as many as 500,000 employees during the next 60 to 90 days.  Hotel industry leaders recently met with Secretary of Commerce Don Evans to discuss possible remedies to this situation. Among the issues discussed is a 100% tax deduction for all travel and related expenses.

• In the aftermath of the events, Ernst & Young is anticipating US lodging Revenue Per Available Room (RevPAR) to decline at least 10% monthly for the remainder of 2001.

• The California lodging market has been significantly impacted by recent events. According to our survey of California hoteliers, all hotels reported significant declines in occupancy and increases in cancellation rates across all lodging demand segments during the first few weeks following the events.

• Leisure and group demand decreased substantially across all lodging segments. A slight rebound in travel was observed by some hotels during the week that followed the events, especially in drive- in markets such as San Diego. However, consumer confidence in travel and the economy remains weak.

• All markets surveyed reported that convention activity is picking up for the latter half of October. The main concern is attrition, given that the events are anticipated to take place, but with less attendance.

• Weak economic conditions coupled with recent events have had a considerable negative impact on San Francisco�s lodging market.

• Given that September is a traditionally weaker demand month for the greater Los Angeles lodging area, direct impact of recent events was not as significant.

• Although Los Angeles hotels have been impacted by the recent events, the impact is not as severe when compared to other major domestic lodging destinations.

• As a group, Los Angeles hotels� occupancy and RevPAR deviated at or slightly above US industry levels for the week of 09/09-09/15 relative to last year�s results.

• High group and leisure cancellations following the recent tragic events had an immediate adverse impact on the Anaheim and San Diego hotel markets.

• The already softening San Francisco hotel market seems to have been further hurt by the recent events.

• With the exception of the San Francisco hotel market, Average Daily Rate (ADR) has not fluctuated significantly across the major California hotel sub-markets. This trend indicates that in response to these recent events, hotels have chosen to try and maintain ADR levels.

• Although ADR�s have deviated slightly, occupancy performance levels have decreased across all California lodging segments. Preliminary assessment of the current situation reveals that the pace of recovery in the California lodging market is anticipated to depend on these factors:

• The scope and length of US military action
• Consumer confidence in travel
• The state of the US economy
• In-state lodging demand
• Domestic and international air travel pace

 
• Substantial reduction in international air traffic could jeopardize Los Angeles� international visitors volume. Last year International visitors accounted for 22% of total visitors and 33% of total visitor spending. International air travel to the US should recover within the coming months, however, this recovery could be hampered depending on the type and length of any military action.

 
• Those markets that rely on or accommodate a larger number of driving- distance leisure and group customers, should recover at a faster pace.leisure and group customers, should recover at a faster pace.

• Convention cancellations in September have hurt the major California lodging markets but convention activity remain an important factor to these markets� ability to recover. 

• Microsoft�s LA convention is planned for October and should help local area hotels generate anticipated levels of business in October and potentially overcome short-term setbacks in demand of other segments. 
• Anaheim Convention Center had two cancellations for an approximate loss of 15,000 visitors. Local hotels estimate $12.5 million in lost room revenue directly related to group and convention cancellations. However, group and convention activity is anticipated to stabilize by mid- October. 
• San Diego lost two city- wide conventions with an estimate of 6,000 attendees. No other cancellations have been reported and officials do not anticipate any further cancellations at this time. 
• San Francisco�s Moscone Center had one major convention with an estimate of 14,000 visitors cancel and not reschedule due to recent events. All remaining events on the schedule are planned to proceed and should help the local lodging economy.

To date, given California�s geographic distance from these events, coupled with the state�s lodging demand characteristics and operating results post September 11, it appears that the California lodging market should keep pace with the overall U.S. market and outpace many major U.S. city markets on the road to recovery.