Coming on the heels of reported record profits for the U.S. lodging industry in 2007, Smith Travel Research released less than stellar results for the industry through the first half of this year.

Occupancy reached 65 percent in the second quarter of 2008, down 2.5 from last year's April-June period, but average room rate increased 3.8 percent to $107.31, meaning RevPAR grew 1.2 percent to $69.70. For the first half of the year, occupancy dropped 2.6 percent and RevPAR gained 1.5 percent.

A closer look indicates potential trouble as summer travel should be heating up: Occupancy fell 4.5 percent last month, while room rate gained just 3.2 percent, equaling a 1.4 percent drop in RevPAR. The numbers didn't look any better in STR's weekly report for July 13-19, showing a 4.8 percent drop in occupancy and a 2.4 percent decline in RevPAR.

If the economy continues to falter and that slide continues, the second half of the year could be bumpy for the hotel industry.

Starwood announced Thursday that second-quarter profits fell 16.4 percent and net income dropped to $105 million, from $145 million through the same period last year. The numbers were significantly stronger internationally, with a 9.6-percent increase in RevPAR, but only a three percent gain in North America. Revenue remained mostly unchanged, but increasing costs sliced into profit margins.

'While international lodging demand remains solid, the economic picture in the U.S. has continued to deteriorate, with lodging demand dropping significantly in May," says Starwood CEO Frits van Paasschen. "We are pleased with our second-quarter performance, but are focused on managing costs to minimize the impact of this slowdown. Despite the U.S. economic picture, we remain bullish on our long-term growth prospects."

Marriott earlier this month announced second-quarter earnings dropped 24 percent.