Near-term Economic Uncertainty and Weaker Lodging Performance Result in Lodging Outlook Setback, Says PwC US

NEW YORK, Nov. 12, 2012 /PRNewswire/ -- Reflecting slower near-term economic growth, weaker third-quarter results, and the impact of Superstorm Sandy, an updated lodging forecast released today by PwC US anticipates slower revenue per available room ("RevPAR") growth in 2012 and 2013, compared to the previous outlook. However, there is also enough forward momentum to maintain a positive outlook on the sustained pace of the lodging recovery, with US RevPAR expected to increase 6.6 percent in 2012 and 5.4 percent in 2013.

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The updated estimates in PwC Hospitality Directions US are based on a quarterly econometric analysis of the lodging sector, using historical statistics supplied by Smith Travel Research and other data providers, and an updated macroeconomic forecast released from Macroeconomic Advisers, LLC. Macroeconomic Advisers' November outlook anticipates slower economic growth in 2012 than previously anticipated, primarily due to reduced business confidence and investment, despite reduced uncertainty associated with the Eurozone debt crisis and evidence that consumer confidence and spending have improved. As a result, real gross domestic product ("GDP") is now expected to increase 1.6 percent in 2012, followed by an increase of 2.9 percent in 2013, measured on a fourth quarter over fourth quarter basis.

The outlook for lower RevPAR growth reflects impacts from three sources: third quarter results that came in lower than anticipated, particularly due to performance in September; a more pessimistic macroeconomic outlook, which now calls for slower growth in the second half of 2012 than previously anticipated; and the effects of Superstorm Sandy. Despite these challenges, lodging demand and, more importantly, pricing, are expected to remain on positive trajectories. Overall, based on the analysis referenced above, PwC expects lodging demand in 2012 to increase 2.9 percent, which combined with still restrained supply growth of 0.5 percent, is anticipated to boost occupancy levels to 61.4 percent, the highest since 2007. While hotels across the spectrum of price tiers are expected to benefit from this recovery, hotels in the higher-priced segments are expected to experience the strongest gains. Occupancy levels at hotels in the luxury, upper-upscale and upscale segments are expected to meet or exceed each segment's pre-recession peak. As stronger business transient and group activity returns to higher-priced hotels, revenue management steps are anticipated to drive increased pricing of available hotel rooms, resulting in a continuation of meaningful RevPAR gains. Hotels in the lower-priced segments have not experienced as solid of a recovery in occupancy, but are still expected to realize increased room rates as demand gradually strengthens.

"The lodging recovery is being tested by a period of slower economic growth and recent disruptions related to Superstorm Sandy," said Scott D. Berman, principal and U.S. industry leader, hospitality & leisure, PwC. "Despite these challenges, the trajectory of the recovery remains positive and we anticipate higher occupancy levels and stronger average daily rate growth in 2013."

A full copy of PwC's US Lodging Forecast can be accessed by visiting: http://www.pwc.com/us/en/asset-management/hospitality-leisure/publications/index.jhtml

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SOURCE PwC US