U.S.Hotel Revenue Growth to Continue

Adapted from a 5-20-13  article by Alissa Ponchione on HotelNewsNow.com

The U.S. hotel industry enjoyed first quarter 2013 revenue growth that will continue into 2014, according to a Market Forecast & Hotel Industry Outlook Webinar co-hosted by STR and Tourism Economics.

 Even though the U.S. is in a period of austerity, gross-domestic-product growth will be just over 2% this year and accelerate to 3% during the next year, Adam Sacks, founder and managing director of Tourism Economics, said.  Sacks said additional factors have helped the U.S. economy, as well.

“The worst of the fiscal cliff has been avoided, the Main Street economy has not been dramatically affected and even though tax increases and spending cutbacks have taken hold, there is no noticeable effect on macroeconomics,” he said.

During the first quarter of 2013, the hotel industry’s 6.4% increase in revenue per available room (“RevPAR”) was fueled by a 4.5% uptick in average daily rate (“ADR”), said Bobby Bowers, senior VP of STR.  “What’s driving RevPAR now is rate,” Bowers said.

Supply and demand
Rate recovery is a positive sign, and the favorable supply-demand balance that has persisted for more than a year is showing some initial signs of evening out.

“What you can see with this is the demand part is coming down to sustainable levels after a snap back from the downturn,” Bowers said. However, the “very low” room supply growth over the last two years is “beginning to creep up” around 0.6%.

 More room supply will put a drag on occupancy, he added.  Occupancy growth is solid, according to Sacks, and it will flatten going into 2014 and 2015 as supply begins to increase.

 RevPAR growth is up 6.5% for first the quarter of 2013. Historical patterns show that RevPAR growth extends for long periods of time, followed by a downturn.  Bowers is hopeful that the industry will see more years of RevPAR growth as we continue the multi-year trend.

 “The RevPAR potential for the industry is real,” Sacks said.

Construction pipeline
Moving into the rest of 2013, room supply will grow slowly.  73,000 rooms are under construction in April 2013, a 20% increase of rooms under construction compared to April 2012.

 Overall, Bowers said, “We had a really good start to 2013.” Although room supply growth is creeping higher, it’s still not a huge threat. The focus going forward will be on ADR driving RevPAR, he added.

Adapted by Dave Hogg

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