Solid RevPAR Growth Anticipated to Continue into 2012 According to PwC US Lodging Industry Forecast

NEW YORK, May 24, 2011 /PRNewswire/ -- The updated lodging forecast released today by PwC US shows that the lodging recovery is expected to continue at a solid pace in 2011, driven by balanced growth in industry occupancy and average daily rate (ADR).  As a result of strong demand trends in the initial months of 2011, and delays in expected ADR gains, the underlying sources of revenue per available room (RevPAR) growth have shifted, with occupancy and ADR now expected to contribute equally to a 7.6 percent increase in RevPAR in 2011.  In 2012, strengthening ADR recovery is expected to account for a greater share of an approximate 7.0 percent RevPAR increase, a factor that could lead to improved hotel profitability.

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PwC's updated quarterly lodging forecast is based on an updated US macroeconomic forecast from Macroeconomic Advisers, LLC, which, despite slower economic growth in the initial months of 2011, expects economic growth to regain traction in the second half of 2011.  According to this forecast, temporary factors, including inclement weather conditions and reduced defense spending that contributed to slower-than-expected economic growth during the initial months in 2011, are expected to unwind, supporting stronger growth in the second half of the year. This combined with sustained business investment and improving consumer spending, is expected to result in a 3.2 percent increase in real gross domestic product (GDP) in 2011.

While lodging demand growth is expected to continue in 2011, growth in lodging supply is expected to remain subdued, resulting in continued improvement in the operating performance of existing hotels. Hotel construction activity in 2010 slowed to levels not seen since the early 1990s, with the ratio of new hotel construction starts to existing supply averaging less than one percent. This slowdown in lodging supply growth is expected to keep the number of new hotel rooms under check, with lodging supply increasing by only 0.7 percent in 2011, significantly below the long-term average of 2.1 percent. As a result, occupancy levels are expected to increase to 59.8 percent in 2011. Increased confidence in hotel pricing is expected to result in an average daily rate (ADR) increase of 3.7 percent in 2011, followed by a further 5.5 percent increase in 2012.

"The recovery of average room rates is expected to gain traction in the second half of this year. With supply growth subdued and solid demand recovery, hotel operators are increasingly focused on driving room rates, by refining distribution channel strategies and rebuilding their base of advance group bookings to drive yield on short-term bookings," 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