It's interesting that budget hotels are improving in occupancy even though the rest of the hotel occupancy is dropping.
That's exactly what I would expect to happen. Due to the nature of their travel and the motivation for their trips I think backpackers will continue to travel in spite of changng conditions in the world, so that client base stays relatively constant. Traditional travelers, on the other hand, are quick to cut budgets and forego some luxuries, so we see them dropping into the budget sector when times are tough and inflating our occupancy.
In big hotel corporations with both high-priced and budget brands, the lower-priced properties always supply the majority of the revenue. For example, Accor makes FAR more money with their Motel 6 properties than they do from their Sofitel hotels. Expensive hotels still have to provide all the luxury and pampering that they advertise, even if they don't have enough clients to pay the bills. That's why they tend to tank first when the economy takes a bad turn.
It stands to reason that if anyone is going to survive financially through the economic crisis it will be the budget hotels and hostels. (And for those of us trying to convince banks that hostels are viable sources of income this is a great example to back up our claims)