U.S. Hotel Growth to Continue Despite Governmental Challenges

Adapted from an article by By Claudette Covey  Travel Pulse on 3/12/13

U.S. hotels will continue to achieve strong gains in both revenue and profits in 2013, according to the recently released March 2013 edition of PKF Hospitality Research’s (PKF-HR) Hotel Horizons. The hotel industry, in fact, will enjoy a 6.1 percent increase in revenue per available room (RevPAR) this year, along with a 10.2 percent boost on the bottom-line net operating income.

R. Mark Woodworth, president of PKF-HR, said, “Our forecast of a 1.8 percent increase in demand for 2013 is somewhat muted compared to the 3 percent increase recorded by Smith Travel Research (STR) in 2012.  However, when you combine the 1.8 percent growth in lodging demand with a projected increase in supply of just 0.8 percent, occupancy levels will rise to 62 percent. This will take the U.S. lodging industry past the long-run average occupancy level of 61.9 percent, a significant milestone.”

The projected RevPAR 2013 growth rate is more than double the long-run average of 2.9 percent.

PKF-HR is forecasting the average occupancy rate for U.S. hotels to increase by 1 percent in 2013, while average daily rate (ADR)is expected to rise by 5 percent. The $111.40 national ADR level projected for 2013 will be greater than the pre-recession peak of $107.42 achieved in 2008 in nominal terms.

Another benefit of rising room rates is the positive impact on hotel profits. After the 5 percent growth in ADR forecast for 2013, PKF-HR is projecting average room rates to grow at an even greater rate through 2016. “We are in the middle of a five-year period where industry fundamentals are extremely solid: supply growth will be below average for the foreseeable future, which will lead to revenue and profit growth well in excess of the norm,” Woodworth said.

After slowing down in 2013, the pace of revenue growth for U.S. hotels is expected to accelerate dramatically in 2014. PKF-HR is forecasting RevPAR for the U.S. lodging industry to increase by 8.4 percent in 2014, the greatest annual gain in RevPAR since 2005. The RevPAR growth will be the result of a combination of a 2.1 percent increase in occupancy and a 6.2 percent rise in ADR.

Looking beyond 2014, the optimistic outlook continues. New hotel development is expected to pick up and surpass 2 percent in 2015. However, based on Moody’s economic outlook, demand growth should continue at a level sufficient enough to maintain occupancy levels above 63 percent. PKF-HR expects that room rates will grow more than 5 percent annually through 2016.

… Adapted (mostly word for word) by Dave Hogg

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