The Hong Kong Hotels Association (HKHA) admits 'the sheer decline' of the local tourism industry during the past year has 'exceeded its worst expectations'. The association warned before its annual meeting yesterday that average room rates and staffing levels among its members might yet have to adjust downwards temporarily to compensate for the shrunken market. For the year ended in June, high-tariff hotels were hardest hit, with occupancy rates falling to 61.8 per cent, from 84.5 per cent the previous year, chairman Ivan Lee Wank-hay said. 'The total picture is undeniably gloomy,' he said. To 'relieve some of the pain', some of the hotels had been passing the burden to contractors and suppliers. Mr Lee said manpower levels in some hotels might also be looked at more closely, with the possibility that another 10 per cent of local hotel jobs could go this year. The HKHA, an industry grouping that includes almost all the leading local hotels, said average room rates for the first eight months of the year had fallen 40 per cent when compared with the previous year. 'The previous year was really a peak period for hotel sales with the handover, and we expected sales to drop off a bit,' Mr Lee said. 'But room occupancies have been down a lot.' He said the average room occupancy in July and August - at 73 per cent - was down 13 per cent from the same period a year earlier. While business had been far worse than expected, there were signs that the downturn had begun to bottom out, Mr Lee said. Room rates, he said, had stabilised and there were indications sales at food and beverage outlets in the hotels were beginning to recover. 'We are already extremely attractive in terms of pricing for the levels of service we provide,' he said. HKHA executive director James Lu Shien-hwai said some hotels were already beginning to re-hire staff after natural wastage had reduced the industry workforce by about 15 per cent during the past year. 'Increasing efficiency and business volume is now the focus,' he said.