ITHACA, N.Y. -- The recent rise in gasoline prices may end up causing significant losses in room sales for the U.S. lodging industry, according to a study conducted at Cornell University's School of Hotel Administration.

The study, which was done at the Cornell Hotel School's Center for Hospitality Research, confirms that when gas prices rise, fewer people rent hotels rooms, particularly rooms at mid-market and economy hotels with suburban or highway-oriented locations. While a link between the cost of gas prices and hotel occupancy rates had long been suspected, the dramatic news is that gas price increases turn out to be far more harmful to the U.S. lodging industry than people had previously guessed.

The study found that, on average, a 1 percent increase in gas prices results in a 1.74 percent drop in rooms demand. Those deceptively small-sounding numbers translate into a loss of millions of room-nights in hotels across the country for every 1 percent increase in gas prices (room-nights are the number of rooms a hotel rents on a given night).

One major benefit of the study is that it quantifies the loss in hotel room demand as gas prices rise. It shows, for example, that a 1 percent increase in gas prices reduces annual economy-hotel demand by about 2.8 percent. Mid-market limited-service properties (that is, without food service) are squeezed too, losing 2.5 percent of room-nights for every 1 percent increase in gasoline prices. Upscale hotels also are affected by rising gas prices, with a likely loss of about 1 percent of room-nights for every 1 percent increase in the cost of gas. Upper upscale hotels are the only segment that does not suffer a significant drop in room occupancy rates when gas prices rise, according to the study.

The study's authors -- Hotel School faculty members Kate Walsh, Cathy Enz and Linda Canina -- were surprised by the dramatic results. "We were not prepared for the magnitude of the loss in lodging-industry demand caused by rising gas prices," commented Enz, who is executive director of the Hotel School's Center for Hospitality Research. "I must emphasize that this study is based on branded hotels nationwide in all industry segments and comprises 13 years of data -- through good times and bad."

The researchers examined monthly room-night data from 1988 through 2000 from the database of Smith Travel Research, which compiles rate and occupancy data from 98 percent of U.S. hotels. They analyzed room-night demand and gas prices in 1988-2000, examining the effects of gas price increases on various lodging-industry segments and locations. To help isolate the effects of gas prices and control for the general effects of good or bad economic times, they factored in the U.S. gross domestic product. All prices were adjusted to year-2000 dollars, based on the U.S. consumer-price index.

The Center for Hospitality Research at Cornell's Hotel School conducts and sponsors research studies aimed at improving the hospitality industry's fundamental operating knowledge. Full details of the study, with a segment-by-segment breakdown of the effects of rising gas prices, can be found on the Cornell Hotel School's Center for Hospitality Research web site at http://www.hotelschool.cornell.edu/chr, or call (607) 255-9780.

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