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Despite Fiscal Challenges, U.S. Lodging Sector Performance Remains Robust, Says PwC US

PwC US anticipates the underlying strength of travel activity will continue to boost revenue per available room ("RevPAR") in 2014, as the economy emerges from fiscal headwinds

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NEW YORK, Nov. 12, 2013 /PRNewswire/ -- An updated lodging forecast released today by PwC US shows favorable gains in hotel performance are continuing in the second half of 2013, and, assuming a fiscal policy resolution is reached, improving economic conditions are expected to help support further hotel performance gains next 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 limited. As demand continues to outpace supply growth, and economic conditions strengthen, PwC expects growth in occupancy and average daily rate ("ADR") will continue, resulting in RevPAR growth of 5.5 percent in 2013, and improving to 5.9 percent in 2014.

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The updated estimates from PwC are based on a quarterly econometric analysis of the lodging sector, using an updated forecast released by Macroeconomic Advisers, LLC in October and historical statistics supplied by Smith Travel Research and other data providers. Macroeconomic Advisers expects real gross domestic product ("GDP") to increase 1.9 percent in 2013, and accelerate to 3.2 percent growth in 2014, measured on a fourth-quarter-over-fourth-quarter basis.

Overall, based on the analysis referenced above, PwC expects lodging demand in 2013 to increase 2.0 percent, which combined with still-restrained supply growth of 0.9 percent by year-end, 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 such as technology, finance and insurance, healthcare, and professional and business services, while the group segment continues to lag. 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 growth in leisure travel.

Although business leaders remain cautious, investment spending continues to grow, and companies are planning group meetings, 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 4.6 percent increase in ADR in 2014. Among chain scales, luxury hotels are experiencing the strongest performance gains, and are on track for 74.4 percent occupancy in 2013, despite a 25.5 percent increase in supply between year-end 2007 and year-end 2010.

 


2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Occupancy

59.2%

61.3%

63.0%

63.2%

62.8%

59.8%

54.6%

57.5%

59.9%

61.3%

62.2%

62.9%

ADR Growth

0.2%

4.3%

5.6%

7.5%

6.7%

2.9%

-8.6%

0.0%

3.8%

4.2%

4.1%

4.6%

RevPAR Growth

0.4%

7.9%

8.6%

7.7%

6.1%

-2.0%

-16.6%

5.4%

8.1%

6.7%

5.5%

5.9%

Source: PwC and Smith Travel Research.

 

"Outside Washington DC and other markets impacted by the government shutdown, the U.S. lodging industry is expected to finish 2013 on a positive note," said Scott D. Berman, principal and U.S. industry leader, hospitality & leisure, PwC. "The underlying strength of the lodging sector, coupled with a favorable demand-supply balance, is expected to continue to drive average daily rate in 2014, supporting sustained RevPAR growth above five percent for the fifth consecutive year."

About PwC US
PwC US helps organizations and individuals create the value they're looking for.  We're a member of the PwC network of firms in 157 countries with more than 184,000 people.  We're committed to delivering quality in assurance, tax and advisory services.  Tell us what matters to you and find out more by visiting us at www.pwc.com/US. Gain customized access to our insights by downloading our thought leadership app: PwC's 365™ Advancing business thinking every day.

Learn more about PwC by following us online: @PwC_LLP, YouTube, LinkedIn, Facebook and Google +.

© 2013 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC US refers to the US member firm, and PwC may refer to either the PwC network of firms or the US member firm. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

SOURCE PwC US



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