PwC Predicts Continued Recovery in Hotel Room Demand in 2012 & 2013
June 5, 2012
Despite economic risks associated with a recovery and the European sovereign debt crisis, an updated lodging forecast released today by PwC US anticipates revenue per available room (“RevPAR”) recovery in 2012 to remain intact, with stronger price gains anticipated in 2013.
As the US economy has improved, travel activity in the US has continued its robust recovery. Business and leisure travel posted solid gains in the first four months of 2012, and even the group segment experienced an uptick in demand and bookings. As a result of continued recovery in demand, PwC predicts RevPAR to increase by 6.5 percent in 2012 and 5.6 percent in 2013, building on the strong 8.2 percent increase in 2011.
One potential issue in the PwC estimate is that they are based on a quarterly econometric analysis of the lodging sector using historical statistics supplied by Smith Travel Research and a macroeconomic forecast released in May from Macroeconomic Advisers, LLC, which expects moderate economic growth in 2012, followed by acceleration in the second half of 2013. Macroeconomic Advisers’ outlook expects real gross domestic product (“GDP”) to increase 2.5 percent in 2012, followed by an increase of 3.1 percent in 2013, measured on a fourth quarter over fourth quarter basis.
According to PwC, the outlook for RevPAR recovery reflects continued momentum in business travel, including gains in corporate meetings, as well as leisure travel growth that includes greater volumes of international visitors. As a result, lodging demand in 2012 is expected to increase 2.5 percent, which combined with still restrained supply growth of 0.4 percent, is expected to boost occupancy levels to 61.3 percent, the highest since 2007.
Hotels across the spectrum of price segments experienced average daily rate (“ADR”) gains in the first quarter, reflecting the breadth of the industry recovery. Looking ahead, increased confidence from occupancy gains is expected to allow hotels to raise room rates, particularly in the higher-priced segments of the industry. As a result, ADR is expected to increase by 4.3 percent in 2012 and 4.8 percent in 2013.
Posted by Scott R. Lodde