Home
Hotel News
Upcoming BITAC® Events - Request Event Info
Tech & Operations 2014 (May 4 - May 6) 1 Spots Left for Suppliers
Global 2014 (June 8 - June 10) 12 Spots Left for Suppliers
Purchasing & Design East 2014 (July 20 - July 22) 4 Spots Left for Suppliers
  Are you a member? Log In  or  Sign Up
Best Western International
 
Share
Send a summary and link to this article
To Email
Your Name
Your Email
Bot Test
To pass the Bot Test, please type the white text that you see in the gray box. This helps us prevent spammers from abusing the system.
Print Printable Version

PKF: U.S. Hotels Poised To Resume Strong Growth

Wednesday, December 18, 2013
bookmark this
Bookmark to: Digg Bookmark to: Del.icio.us Bookmark to: Facebook
Bookmark to: Yahoo Bookmark to: Google Bookmark to: Twitter
We are on Twitter
PKF Consulting
PKF Consulting

After a slight decelerationin growth during the last half of 2013, PKF Hospitality Research, LLC (PKF-HR)is forecasting very strong gains in revenues and profits for the U.S. lodgingindustry in 2014 and 2015. According tothe recently released December 2013 edition of Hotel Horizons®, national revenueper available room (RevPAR) is projected to increase by 6.6 percent in 2014,followed by another 7.5 percent boost in 2015. Concurrently, hotel profits should enjoy growth of 12.8 percent and 14.5percent respectively over the next two years.

“As anticipated, RevPARgrowth slowed down a bit in 2013 compared to the previous three years,” said R.Mark Woodworth, president of PKF-HR. “Entering the year, we knew fears of falling off the fiscal cliff wouldcreate uncertainty in the minds of potential travelers. As the year progressed, the sequester andgovernment shutdown caused additional angst. However, despite the challenging economic environment, we observed aboveaverage growth in lodging demand, average daily rates (ADR), RevPAR andprofits.”

PKF-HR estimates that byyear-end 2013, lodging demand will grow by 2.1 percent. This is greater than the projected 0.8percent increase in supply, thus resulting in a 1.3 percent gain in occupancy. The 62.1 percent occupancy level estimatedfor the year surpasses the long-run average of 61.9 percent as reported bySmith Travel Research (STR).

“Our firm’s forecast fornominal ADR growth in 2013 is 3.9 percent. Given the fact that occupancy levels have finally eclipsed the long-runaverage, some hoteliers were expecting even greater rate growth. Clearly this is the one measure that wasimpacted most by the economic uncertainty that characterized 2013,” saidWoodworth. “Industry participants needto temper their disappointment, though. As we have noted in the past, hotels have been achieving highlydesirable, real ADR growth during this low inflationary environment. We also should note that evidence of greaterfuture demand from meeting planners will lend tensile strength to revenuemanager’s enhanced pricing power in 2014.”

Economic Improvement

While the enjoyment of U.S.hotel owners and operators may have been restrained in 2013, they should bejubilant the next two years. PKF-HR’slodging forecasts are driven by economic projections provided by Moody’s Analytics(Moody’s). According to Moody’s, 2014 isshowing all the signs of being a “breakout year.”

“We are very encouraged byMoody’s outlook for the national economy in 2014,” said John B. (Jack) Corgel,PhD., the Robert C. Baker professor of real estate at the Cornell UniversitySchool of Hotel Administration and senior advisor to PKF-HR. “As lodging forecasters, it is our role tointerpret the economic variables provided by Moody’s and produce projections ofhotel performance. Moody’s hasidentified certain economic factors that we believe will have a very positiveimpact on the growth of lodging demand and room rates over the next fewyears.” The following statementshighlight Moody’s current outlook for the economy in 2014 and beyond:

• Accelerating job growth should allow the U.S. to reachfull employment in three years.

• Debt burdens have fallen, businesses are flush with cash,and profit margins are strong.

• Confidence has been the missing ingredient, but signspoint to stronger investor and consumer sentiment.

“Of course, there are stillsome potential obstacles that we will be monitoring. The continuing brinksmanship between Congressand the executive branch perpetuates economic uncertainty. Also, it will be interesting to see how theFederal Reserve acts as the economy improves, and they unwind the monetarystimulus enacted during the depths of the recession,” Corgel observed.

Based on Moody’sprojections for GDP, income and employment growth in 2014, PKF-HR isforecasting lodging demand to grow by 3.0 percent along with a 1.8 percent risein supply. The net result is a 1.8percent gain in occupancy, accompanied by a 4.8 percent increase in ADR.

Location, Location

Given the strong outlookfor U.S. lodging performance, investment and development interest is high. “The relatively strong recovery of luxury,upper-upscale and upscale hotels located within the nation’s major markets hasbeen well documented. Therefore, it hasnot been surprising that these property types are attracting the greatestinterest. Now we are seeing our clientsstarting to focus on what areas to invest and/or build their upper-pricedhotels within these strong markets,” noted Woodworth.

Since 2009, PKF-HR has beenforecasting the performance of six location categories. The location classifications as defined bySTR are airport, interstate, resort, small town/metro, suburban and urban. Just as has been observed within thechain-scales, the recovery patterns among the different location categories havevaried since 2009. As of year-end 2013,PKF-HR estimates the only location groupings to have returned to theirpre-recession peak levels of occupancy will be airport and urban hotels.

“Urban hotels were thefirst location category to recover from the recession. While this limits their potential foradditional occupancy gains, they are at a point in their respective businesscycle where pricing power will dominate revenue growth. Conversely, airport hotels are just reachingtheir previous peak, so they are expected to continue to benefit from stronggains in both occupancy and ADR in 2014,” said Woodworth.

Among the locationcategories, hotels located in airport, resort and suburban areas are forecastto achieve the greatest gains in RevPAR in 2014. Lagging in RevPAR growth will be propertiesoperating along the nation’s interstate highways and in small towns. “This is a natural progression – strongperformance in the central business district leads to compression in the restof the metro area,” Woodworth concluded.

To purchase a December 2013Hotel Horizons® report, please visit www.hotelhorizons.com. Reports are available for each of 50 majormetropolitan areas in the U.S., and contain five year projections of supply,demand, occupancy, ADR, and RevPAR. Toview this press release on a webpage, please visit: http://goo.gl/tTpShj.

ABOUT PKF CONSULTING USA,LLC

Headquartered in SanFrancisco, PKF Consulting USA, LLC (www.pkfc.com) is an advisory and realestate firm specializing in the hospitality industry. PKF Consulting USA is owned by FirstServiceCorporation (FSRV) and is a subsidiary of Colliers International. The firm operates two companies: PKFConsulting USA, LLC. and PKF Hospitality Research, LLC. The firm has offices in New York, Boston,Indianapolis, Chicago, Philadelphia, Washington DC, Atlanta, Jacksonville,Tampa/Orlando, Houston/Dallas, Los Angeles, Bozeman, and San Francisco.
Feedback Messaging & Feedback
We welcome your opinion! Log In to send feedback.
Already a member?
Login
Log In
Not yet registered?
Login
Sign Up
Need More Information?
Information
Benefits
 
  RSS Feed
RSS Feed
Policies
Contact Us
Mobile Version