NEW YORK—PwC US anticipates that positive momentum in travel activity will continue to boost revenue per available room (RevPAR) in 2013, despite the recent sluggish pace of economic recovery. An updated lodging forecast released by PwC US shows favorable gains in hotel performance, consistent with PwC’s expectations at the start of the year. Occupancy levels at higher-priced hotels are ahead of prior peak levels, industry RevPAR is above its prior peak, and hotel construction activity, while rebounding, is still quite moderate, according to PwC. As demand continues to outpace supply growth, and economic growth strengthens, PwC expects growth in average daily rate (ADR) will continue, resulting in RevPAR growth of 5.6 percent in 2013, improving slightly to 5.9 percent in 2014.
The updated estimates from PwC are based on a quarterly econometric analysis of the lodging sector, using an updated macroeconomic forecast released by Macroeconomic Advisers, LLC in August and historical statistics supplied by Smith Travel Research and other data providers. Macroeconomic Advisers expects real gross domestic product (“GDP”) to increase by 2.0 percent in 2013, and then accelerate to a growth of 3.0 percent in 2014, measured on a fourth-quarter-over-fourth-quarter basis.
PwC expects lodging demand in 2013 to increase 2.2 percent, which combined with still-restrained supply growth of 0.8 percent, is anticipated to boost occupancy levels to 62.2 percent, the highest since 2007. Demand gains are primarily being led by the business and leisure transient segments, which have benefited from activity in sectors important to lodging, such as technology, healthcare, and business and professional services, among others, while the group segment continues to lag. Recent macroeconomic data suggest that consumer spending is firming, in part due to gains in household wealth, lower household debt burdens, and gradual improvement in labor markets, supporting the underlying momentum of leisure travel. And, though business leaders remain cautious, business investment spending is growing, and companies continue to plan group meetings and events, with stronger bookings in place for 2014. Increased occupancy levels are expected to give operators further confidence to drive increased pricing, resulting in a solid 4.7 percent increase in ADR in 2014.
“While the pace of economic recovery remains an overhang on some segments, particularly group travel, we’re seeing business and leisure transient hotel demand remain robust, particularly in most of the U.S. top 25 markets,” said Scott D. Berman, principal and U.S. industry leader, hospitality and leisure, PwC. “As U.S. hotels enter the budgeting and rate negotiation period this fall with their most significant corporate customers, the foundation is in place for room rate gains, in part due to a favorable supply-demand balance.”
Photo Credit: Businessman hand pushing a business graph via BigStock