Revenue per room has fallen in Dublin hotels this year, with the top end of the market bearing the brunt of the downturn, according to Davy Stockbrokers.

Occupancy levels have fallen by 3.5 per cent in the year to date, while room rates have risen 2 per cent on average, producing a 1.6 per cent fall in room yield.

Based on preliminary data from an Arthur Andersen survey, the figures give a very broad indication of the overall trend in the Dublin market, Davy says.

Following the events of September 11th in the United States, occupancy levels were down by 11.4 per cent - the seventh straight month of declining occupancy levels and the largest fall of the year.

For the first time this year, average room rates also turned negative, declining 1.4 per cent and resulting in a 12.6 per cent fall in room yield in September, the survey said. "September was a month where there seemed to be a big decline in occupancy levels, which isn't surprising," said Davy analyst Mr Stephen Furlong. "But room rates have also come down, which will have implications for hotel companies' bottom lines."

While further downward pressure on room rates is expected, the upper end of the market is likely to be hardest hit. "Generally, the top end of the market is more affected than the lower end," Mr Furlong said.

"Really, the weakness is at the top end of the market and it stands to reason because that's where US visitors are going to come to." The addition of more than 400 rooms in the five-star market following the opening of the Westin and Four Seasons hotels had added around 30 per cent capacity to this market segment which, in the current economic downturn, may lead to downward pressure on room rates, he said.

"That pressure will fall straight to the bottom line given the operational gearing nature of hotel companies," he said.

However, Jurys Doyle chief executive Mr Pat McCann attributed the pressure on the upper end of the market solely to the fall-off in US visitors and the cancellation of conferences.

"The upper end has seen the greatest hit," he said. "I don't think the new product openings have had any effect at all on our business."

Mr McCann said the group's three star and Inns products had performed "exceptionally well", with a continuing high level of activity.

"It's probably not just us - I'd say it is a general trend across the board," he said.

In a period of low demand and excess supply, there is likely to be a flight to quality, Mr Furlong added.

"The likely winners are the ones with superior brands and distribution capabilities, such as Jurys."