RevPAR Growth Momentum Expected to Yield to New Economic Reality According to PwC US Lodging Industry Forecast

NEW YORK, Aug. 30, 2011 /PRNewswire/ -- An updated lodging forecast released today by PwC US shows that the lodging recovery is largely intact, yet a resetting of the economic outlook has lowered expectations of revenue per available room (RevPAR) growth for the remainder of the year. The reduced outlook is due to an economy that faces more fundamental and persistent headwinds than economists previously anticipated, and this environment weighs on the lodging industry outlook, reducing expectations of RevPAR growth for the remainder of 2011, and into 2012. PwC's updated lodging industry forecast now expects RevPAR growth of 7.5 percent and 6.2 percent in 2011 and 2012, respectively.

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PwC's updated quarterly lodging forecast reflects a revised macroeconomic forecast from Macroeconomic Advisers, LLC, which now expects a major reset of US economic growth. Weak reading of recent economic data, including a revision of real gross domestic product (GDP) information, now confirms that the recent slowdown, which Macroeconomic Advisers previously thought was concentrated in the first half of 2011 and attributable to temporary factors, started sooner and has been sharper than previously anticipated. As a result of this new view of a fundamental and persistent slowdown in economic forces, Macroeconomic Advisers' outlook for GDP growth was substantially lowered to 1.6 percent and 2.8 percent in 2011 and 2012, respectively.

The reduced outlook for the lodging sector reflects the balanced consideration of weaker economic fundamentals on the one hand, and solid year-to-date lodging trends on the other. The steady growth of lodging demand during recent months, even as the economy slowed, demonstrates the underlying momentum of lodging's recovery. This recovery of lodging demand is expected to continue, but will be tempered by the weaker macroeconomic outlook. As a result, lodging demand in 2011 is now expected to increase by 4.6 percent, which combined with still benign supply growth of 0.8 percent, is expected to boost occupancy levels to 59.8 percent. Increased confidence of occupancy gains are expected to be offset by the weak economic outlook, resulting in an average daily rate (ADR) increase of 3.6 percent in 2011. In 2012, ADR recovery is expected to play a bigger role in RevPAR recovery, resulting in a 5.1 percent and 6.2 percent increase in ADR and RevPAR levels, respectively.

"Current uncertainty about the future economic environment, both at home and abroad, is expected to create a drag on RevPAR recovery during the second half of this year and into next.  We continue to monitor rapidly changing econometric data and evaluate monthly lodging industry metrics, which continue to show wide fluctuations, based on geography and chain scale," said Scott D. Berman, principal and U.S. industry leader, hospitality & leisure, PwC US.

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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© 2011 PwC. All rights reserved. "PwC" and "PwC US" refer to PricewaterhouseCoopers LLP, a Delaware limited liability partnership, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.  

SOURCE PwC US