The positive growth the hotel industry has experienced the past year is an encouraging sign. With US Hotels reaching all-time high occupancy levels, forecasters believe hoteliers will be able to increase their annual ADR pace in 2015. The combination of high occupancy levels and significant ADR growth will support strong bottom-line gains. In this article from Hotel Management, Bruce Serlen, explores some future forecast revisions from top industry analysts.
NEW YORK — With industry fundamentals for 2014 ending the year on a high note, analysts and consultants are getting more comfortable releasing optimistic forecasts for 2015-in two cases even revising upward their already positive predictions made in the past few months.
Such upbeat news from executives at PwC, PKF Hospitality Research, STR and MMGY Global lent the opening sessions at this weekend’s Hospitality Leadership Forum in New York a festive air. The daylong Forum was part of the American Hotel & Lodging Association’s Annual Fall Conference, which in turn was held in conjunction with the International Hotel/Motel & Restaurant Show at the Javits Convention Center.
“Lodging demand really picked up in the third quarter of this year and continues to grow in the fourth quarter, a trend that seems highly likely to continue into 2015. And there’s still room for demand growth in 2015,” PwC managing director Warren Marr told the audience. “We see the industry having the strongest pricing power it has had since probably 2007.”
In a release being issued today, PwC is revising its 2015 revenue per available room growth forecast to 7.4 percent. Contributing to the rosy picture are strong occupancy rates, including frequent sell-out nights in the primary markets, and a long-awaited rebound in group demand.
STR likewise is raising its 2015 RevPAR growth projection to between 5 percent and 6 percent, based on a strong end-of-year performance in 2014. “Through September year-to-date, we’ve seen North American RevPAR growth of 8.1 percent, driven by the performance of the Top 25 MSAs, a number of which have seen RevPAR growth of more than 10 percent,” said Vail Brown, VP of global business development & marketing at STR.
Nor is North America the only region that is thriving. South America has seen a year-to-date jump in RevPAR growth through September of 15 percent, attributable, according to Brown, to the World Cup being held in Brazil as well as high inflation in Argentina. “All the regions of the world are showing positive RevPAR growth, which is a healthy indicator,” she said.
STR is scheduled to release its revised forecast on Friday.
All the speakers noted the importance of new supply growth being kept in check so far this cycle. Too much new construction creates a supply-demand imbalance.
“The last year where we saw an oversupply was 2009. Supply growth reached 3.3 percent. This year, we’re still 40 percent below that rate,” said Jamie Lane, PKF senior economist.
Lane attributed the lack of new supply to developers having trouble obtaining financing and the rising costs of construction. “The financing situation is better than it was during the downturn, but can still be a challenge, depending on the market and nature of the project,” he said.
Lane also addressed the controversial subject of airbnb and its rising popularity as an alternative to traditional hotels. “In certain markets, people renting out rooms in their homes to transient guests has had a definite impact,” he said, adding that, “Cities with high hotel occupancies tend to see the greatest growth in airbnb, so it seems it’s where the excess demand is going.”
Looking to 2015 and beyond, MMGY Global vice chairman Peter Yesawich noted the increasing influence of the millennial generation. “Not only are there more millennials than baby boomers in the U.S. today, but research indicates that millennials intend to take more trips requiring a hotel stay than any of the other demographic groups,” he said.
Yesawich, Lane, Brown and Marr all appeared on the Forum’s “U.S. Lodging Industry Summit” panel. Steve Hood, STR SVP of research, led the session entitled “Industry Update: 2014 Lodging Survey.” Hood reviewed the comprehensive survey, which is in the final stages of production. Released every two years by the American Hotel & Lodging Educational Foundation and STR, it serves as a status report on a range of hotel services and amenities from bedding upgrades to Wi-Fi and mobile.
Acknowledging the large number of hospitality students in the audience, Hood underscored the importance of new talent, if the industry is going to thrive going forward.
“Matching your talent with the industry’s needs around the world is the challenge,” said Hood, who is founding director of STR’s SHARE Center (Supporting Hotel-Related Academic Research & Education).