Tremendous Travel Outlook

Lifted from Hotel Interactive
Monday, May 5, 2014
By Glenn Haussman

Are you feeling good about the state of the hotel industry? Well if no, then it’s time to reevaluate your thinking because things are going absolutely fantastic when it comes to the travel economy. In fact 2013 was an incredible year that broke most real dollar records and this year it’s expected last year’s records will be short lived.

No, not because the industry is falling down, but because it’s rapidly rising. So today’s records will be superseded by even better results when this year is tallied. Industry wide we’ll see even higher numbers for ADR and RevPAR as well as rom nights sold. And all indications point to the next few years showing more continued growth.

Moderate supply growth combined with more American traveling than ever before combined with a massive influx on international travelers will help hoteliers push rates (if they’re smart enough). Oh yeah, more people are also traveling for business than in years and that weakening of group business demand we’ve been worried about seems to be stabilizing. In all, business trip taken this year should climb 1.7 percent to more than 461 million trips says the Global Business Travel Association Business Travel Index Outlook.

Examining industry fundamentals, records are being broken everywhere, including most industry revenue ever at $122 billion according to STR for 2013. Other records broken in 2013 were ADR, RevPAR, and most room nights sold at 1.1 billion.

According to numbers supplied by PKF, final 2013 occupancy was 62.3 percent and is expected to rise to 63.2 percent and 64.4 percent for 2014 and 2015 respectively. It’s also expected that ADR will increase 4.8 percent to $115.60 this year and rise another 5.6 percent to $122.12 in 2015. ADR and occupancy increases together will help propel RevPAR from $68.69 (5.4 percent increase from 2012) up another 6.6 percent to $73.10 in 2014 while rising an additional 7.5 percent to $78.62 in 2015.

Even better news is the economy is soaring, both in and out of the hotel industry. The general economy is seeing record high stock market valuations while large type sale items such as homes and cars are doing very well. Plus, more things are being made in America than in a generation.

At this week’s BITAC Tech & Ops, taking place this week at the Peabody Memphis, we utilized our advanced real-time polling system to break down persisting myths about the state of the economy, the hotel economy and the travel industry at large. And we’re happy to report those attending BITAC are collectively in a very good mood.

BITAC is of course the industry leading one-on-one meetings and relationship building event. This week marks the 48th BITAC meeting, which is attracted lodging executive elite representing leading and forward thinking companies. And they’re all here to come together at BITAC to problem solve, network, sign deals and exchange ideas to move forward the quality of experiences for hotel guests, while adding profits to the bottom line. There’s even time to cut loose, be social and network in a luxurious and relaxed environment.

Here is what BITAC Luxury attendees are thinking a third of the way through 2014:

How are you feeling about the state of the U.S. economy?
Bullish – 10.0%
It’s good – 41.8%
Neutral – 24.5%
A little worried – 21.8%
Freaked out – 1.8%

Do you feel your company is fully leveraged to take advantage of this upswing?
Very ready – 33.9%
Somewhat ready – 56.0%
Neutral – 7.3%
We are not prepared – 2.8%
Just hanging on – 0.0%

How do you feel about the state of the TRAVEL economy compared to one year ago?
Bullish – 25.0%
It’s good – 64.8%
Neutral – 9.3%
A little worried – 0.9%
Freaked out – 0.0%

How much do you expect to see ADR rise in 2014?
1-2% – 17.0%
3-5% – 65.9%
5-10% – 13.6%
10% or more – 1.1%
None – 1.1%
ADR will decrease – 1.1%

How much do you expect to see RevPar increase in 2014?
1-2% – 21.7%
3-5% – 50.6%
5-10% – 24.1%
10% or more – 2.4%
None – 1.2%
RevPAR will decrease – 0.0%

What is your perception of hotel owners’ approach toward raising rates?
Aggressive – 46.7%
Timid – 25.0%
Cautiously Optimistic – 28.3%

Are you seeing an uptick in new construction?
A significant uptick – 32.3%
A moderate uptick – 53.1%
Very few hotels are being built – 14.6%

In what year will the hotel industry peak?
2014 – 2.1%
2015 – 19.6%
2016 – 30.9%
2017 – 35.1%
2018 and beyond – 12.4%

Did your hotels break records with key fundamentals such as ADR & RevPAR in 2013?
We broke records! – 41.2%
We were close, but not yet – 49.0%
Not happening for us – 3.9%
Our numbers stink – 5.9%

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