After a two-year slump, Palo Alto's hotels appear to be filling up again -- a welcome sign for city officials who have seen local revenues plummet during the Great Recession.

Hotel occupancies have climbed from 62 percent in February to 75 percent in September, even though room rates have remained steady at $142 per day, according to a recent report from the Administrative Service Department. The report states that if this "healthy level" of occupancy rates continues, the city should receive more in hotel taxes this fiscal year than it had budgeted.

The trend is a marked reverse from the past two years, when local hotel occupancies experienced a steady drop. In fiscal year 2010, which ended June 30, budget officials had to reduce their budget projections from hotel taxes by $400,000 because of lower occupancy and room rates. The occupancy rate dropped from 65.2 percent to 62.9 percent between February 2009 and February 2010 and room rates went down from $145.90 to $137.60 per day.

Now, city officials are again preparing to change their projections, but this time in the other direction. The city planned to receive about $7 million in hotel revenues in fiscal year 2011. Now, it looks as if the city will exceed this number, Interim Budget Manager Christine Paras said in the report.

Staff is also banking on less revenue from property taxes, largely because of the high number of commercial properties going through reassessments and Santa Clara County's "substantial backlog" in processing commercial reassessment requests.

As a result, the city is reducing its projected 2011 revenues from property taxes from $25.9 million to $25.5 million.

The City Council Finance Committee will discuss the report at its meeting Tuesday night. The meeting will be held at 7 p.m. in the Council Conference Room at City Hall, 250 Hamilton Ave.