Thriving Hotel Industry Prompts Analysts to Revise Forecasts Upward

Generic Trend Chart

(Adapted for the blog from an 11-10-14 article by Bruce Serlen in Hotel News Now)

NEW YORK — With industry fundamentals for 2014 ending the year on a high note, analysts and consultants are getting more comfortable releasing optimistic forecasts for 2015-in two cases even revising upward their already positive predictions made in the past few months.

Such upbeat news from executives at PwC, PKF Hospitality Research, STR and MMGY Global lent the opening sessions at this weekend’s Hospitality Leadership Forum in New York a festive air. The daylong Forum was part of the American Hotel & Lodging Association’s Annual Fall Conference, which in turn was held in conjunction with the International Hotel/Motel & Restaurant Show at the Javits Convention Center.

“Lodging demand really picked up in the third quarter of this year and continues to grow in the fourth quarter, a trend that seems highly likely to continue into 2015. And there’s still room for demand growth in 2015,” PwC managing director Warren Marr told the audience. “We see the industry having the strongest pricing power it has had since probably 2007.”

In a release being issued today, PwC is revising its 2015 revenue per available room growth forecast to 7.4 percent. Contributing to the rosy picture are strong occupancy rates, including frequent sell-out nights in the primary markets, and a long-awaited rebound in group demand.

STR likewise is raising its 2015 RevPAR growth projection to between 5 percent and 6 percent, based on a strong end-of-year performance in 2014. “Through September year-to-date, we’ve seen North American RevPAR growth of 8.1 percent, driven by the performance of the Top 25 MSAs, a number of which have seen RevPAR growth of more than 10 percent,” said Vail Brown, VP of global business development & marketing at STR.

Nor is North America the only region that is thriving. South America has seen a year-to-date jump in RevPAR growth through September of 15 percent, attributable, according to Brown, to the World Cup being held in Brazil as well as high inflation in Argentina. “All the regions of the world are showing positive RevPAR growth, which is a healthy indicator,” she said.
STR is scheduled to release its revised forecast on Friday.

All the speakers noted the importance of new supply growth being kept in check so far this cycle. Too much new construction creates a supply-demand imbalance.

“The last year where we saw an oversupply was 2009. Supply growth reached 3.3 percent. This year, we’re still 40 percent below that rate,” said Jamie Lane, PKF senior economist.  Lane attributed the lack of new supply to developers having trouble obtaining financing and the rising costs of construction. “The financing situation is better than it was during the downturn, but can still be a challenge, depending on the market and nature of the project,” he said.

Looking to 2015 and beyond, MMGY Global vice chairman Peter Yesawich noted the increasing influence of the millennial generation. “Not only are there more millennials than baby boomers in the U.S. today, but research indicates that millennials intend to take more trips requiring a hotel stay than any of the other demographic groups,” he said.

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