Growth in Lodging Industry Expected Next Year, PwC Says

Lucas Gilmore, “Big 4″ observer
November 15, 2010 /

An updated report of PwC USA forecasts that the returns in pricing power compared to the earlier recovery in lodging industry will likely cause a shift in the focus on demand growth to average daily rate gains (ADR).

PwC reported that occupied rooms have sustained their growth even during the sluggish recovery of the economy in 2010, proof of which is indicated in a recent performance metrics in which the demand for rooms was estimated to be only 1.1 percent behind the 2007 rates. The demand for lodging has since recovered more speedily after it has reached its peak similar to the economy in mid-2009.

This solid growth in the demand for rooms is anticipated by the PwC to thrust the possibility of laying out plans for the next steps aimed at recovering even further.

The updated forecasts of the PwC largely depend on the updates as well of Macroeconomic Advisers, LLC, reflecting a boosted recovery by 2011.

Existing hotels could take the almost inactive growth in constructions of new ones as a factor to further strengthen their operations for recovery. The number of new constructions decreased from 133,000 rooms in 2008, to 48,000 in 2009, and is projected to go down to 29,300 by the end of this year, forcing the demand for lodging supply to increase 2.0 percent and 0.4 percent in 2010 and 2011, respectively.

With this decrease in the lodging supply, the demand would necessarily increase, expected to be at 5.7 percent and 2.5 percent in 2010 and 2011, respectively. As a result, room rates are expected also to increase in 2011. The return of business travelers partly affects this rate hike. The ADR would increase 4.8 percent in 2011, as a consequence, driving the RevPAR to a 7.4 percent growth.

“Despite a weak national economy, occupancy rates continue to recover in many US markets, preparing hotels for an uplift in average room rates during 2011. The degree of increases in room rates will vary dramatically from market to market,” said Scott D. Berman, principal and U.S. industry leader, hospitality & leisure, PwC.


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