The hotel sector might be facing a slightly bleaker outlook next year with fewer major trade shows targeting the key business travel market and intensifying competition from Macau, the Hong Kong Hotels Association said. Association chairman Mark Lettenbichler said he expected hotel room occupancy rates to end this year at 87 per cent, a healthy increase from last year's 82.5 per cent. A one-percentage point drop is forecast for next year. Hotels are benefitting from a slew of major trade fairs this year, including the recent Pacific Asia Travel Association trade show and the International Telecommunication Union Telecom World conference in December, with close to 50,000 delegates attending. 'Occupancy rates are still strong,' he said, pointing to the thriving travel trade and airline business. 'There is a positive indication for 2007.' For the first eight months of this year, the association reported occupancy rates of almost 86 per cent, an increase of 3.4 percentage points from a year ago. Room rates averaged HK$935, up more than 11 per cent year on year. Mr Lettenbichler said average room rates might continue rising by 3 per cent or 4 per cent next year. Five-star establishments might see their room rates increase the most, at between 5 per cent and 10 per cent. Higher room rates could lead to a slight decline in occupancy levels, he said. 'High tariff A rates, or five-star hotels, have almost caught up to the peak 1996 levels. High tariff B rates probably have another HK$300 to HK$400 more to catch up,' he said. Occupancy rates are expected to be about the same as last year for the mainland's National Day holiday next week, Mr Lettenbichler said. The association's forecast for the October 'golden week' holiday was made last week and put the occupancy rate at between 81 per cent and 83 per cent, two percentage points lower than last year. He said last-minute bookings could raise the rate to last year's level or higher. Spending by mainland visitors, especially those visiting Hong Kong outside of tour groups, is also rising, Mr Lettenbichler said. Many are upgrading their holiday accommodation from three- to four-star hotels, although most tour groups continue to use three-star places, he said.