Room Rate Gains to Drive RevPAR Growth in 2015, As Favorable Demand-Supply Balance Supports Peak Occupancy Levels, Says PwC US

NEW YORK, Jan. 26, 2015 /PRNewswire/ -- An updated lodging forecast released today by PwC US anticipates average daily rate ("ADR") gains to accelerate and drive revenue per available room ("RevPAR") growth in 2015, building upon the solid fundamentals experienced in 2014. Last year, both individual and group travel exhibited strong momentum, with the year-over-year pace of growth in group travel outpacing the individual travel segment. This solid demand momentum, coupled with supply growth that is expected to remain below the long-term average, is anticipated to set the stage for a significant increase in pricing power for hotels, supporting our outlook of a solid 7.4 percent increase in RevPAR in 2015. With industry occupancy expected to reach levels not seen since 1984, over 80 percent RevPAR growth in 2015 is expected to come from increases in average daily rate – the highest contribution average daily rate has made to RevPAR growth in the current economic cycle.

The estimates from PwC are based on a quarterly econometric analysis of the lodging sector, using an updated forecast released by Macroeconomic Advisers, LLC in January and historical statistics supplied by STR and other data providers. Macroeconomic Advisers expects real gross domestic product ("GDP") to increase 3.0 percent in 2015, measured on a fourth-quarter-over-fourth-quarter basis.

Based on this analysis and recent demand trends, PwC expects lodging demand in 2015 to increase 2.6 percent, which combined with below long-term average supply growth of 1.5 percent, is anticipated to boost occupancy levels to 65.1 percent. As the lodging development pipeline continues to fill up, supply growth is expected to accelerate from 0.9 percent in 2014 to 1.5 percent in 2015, but still remain below the long-term average of 1.9 percent. While hotels in the higher-priced segments are expected to benefit the most from returning pricing power, occupancy levels in the lower-priced chain scale segments are expected to approach or exceed prior peak levels, as price-driven compression from higher-priced hotels drives demand to lower-priced hotels.

"2014 was a year of pleasant surprises for U.S. hotels on many fronts, including a meaningful recovery in group demand not seen since 2010," said Scott D. Berman, principal and U.S. industry leader, hospitality & leisure, PwC. "With a strong near-term economic outlook, solid business and leisure travel trends, and below average supply growth, owners and operators can expect to have significant pricing power yielding higher room rates in 2015."

To access PwC Hospitality Directions US - January 2015, please visit: http://pwc.to/1wxMnF9.

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, which has firms in 157 countries with more than 195,000 people. We're committed to delivering quality in assurance, tax and advisory services. Find out more and tell us what matters to you by visiting us at www.pwc.com/US.

© 2015 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC refers to the US member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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SOURCE PwC US

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