Hotel Stocks Drop–Will Room Rates Follow?

redonemorgans Hotel Stocks Drop  Will Room Rates Follow?So much for the hotel boom.

The AP is reporting that shares of hospitality companies are tanking amid a gloomy outlook for travel in 2009.

New York-based companies Morgans Hotel Group and Starwood Hotel & Resorts were among those with the steepest declines during the Dow’s overall 777-point freefall on Monday:

Starwood shares dropped $3.39, or 11.2 percent, to $26.88 in afternoon trading, after touching a 5-year low of $25.95 earlier in the session. Morgans Hotel shares lost $1.61, or 12.9 percent, to $10.83.

How will the financial crisis impact the city’s ever-higher tourism projections? Will less demand for rooms trigger a drop in skyrocketing hotel rates?

Stay tuned.