PwC Forecasts Booking Acceleration Will Drive Highest Occupancy Levels In 20 Years
By Christine Kern, contributing writer
U.S. room rate gains due to strengthened group demand.
According to an updated lodging forecast recently released by PwC US, there will be stronger occupancy gains in 2015, bringing the highest occupancy levels in 20 years.
In May, PwC predicted that continued recovery in the group segment and rebounding economic momentum would lead to solid 6.5 percent RevPAR growth in 2014. The May forecast stated that as supply growth accelerates in 2015, occupancy growth will slow slightly to 1.3 percent. However, pricing power will also accelerate as many hotels more frequently reach occupancy constraints, resulting in a solid 5.1 percent growth in average daily room rates.
The revised outlook sees an expected solid 7.6 percent RevPAR increase in 2014. The outlook states, “In 2015, supply growth is expected to accelerate, resulting in decelerating occupancy growth. Still, industry-wide occupancy levels are expected to reach 64.8 percent in 2015, the highest since 1995, giving hotel operators more confidence to push for higher room rates.”
PwC uses a quarterly econometric analysis of the lodging sector, using an updated forecast released by Macroeconomic Advisers, LLC in August and historical statistics supplied by Smith Travel Research and other data providers, to create the forecast.
According to Macroeconomic Advisers, real gross domestic product ("GDP") should increase 2.0 percent in 2014, and accelerate to 3.1 percent growth in 2015.
Using these calculations, PwC predicted that lodging demand for 2014 would increase 4.0 percent, with still-restrained supply growth of 1.0 percent, which should boost occupancy levels to 64.1 percent. Supply growth should accelerate to 1.6 percent in 2015, with increased construction of new hotels, and supply growth in the higher-priced chain scale segments are set to outpace growth in the lower-priced segments. Meanwhile, occupancy levels in the lower-priced chain scale segments should match or exceed prior peak levels, as demand is driven to lower-priced hotels via compression.
The PwC data is corroborated by data from the July 2014 TravelClick North American Hospitality Review (NAHR), which showed that hotels in major North American markets are continuing to experience steady growth in both rate and occupancy across travel segments.
“While the transient segment has been performing well for months, the group segment’s recent increase provides an opportunity for hoteliers to take measured transient pricing action to gradually increase average daily rates (ADR),” said John Hach, Senior Vice President, Global Product Management of TravelClick. “Current and future reservation pace continues to show solid gains across the board, providing an opportunity for hoteliers to take calculated risks to grow revenue per available room (RevPAR) at an accelerated rate.”
"The strengthening of the group segment thus far in 2014 and a strong summer travel season across all price points is encouraging for future occupancy levels and continued industry growth,” said Scott D. Berman, principal and U.S. industry leader, hospitality & leisure, PwC. “We will be closely monitoring the industry's third quarter results to evaluate any change in momentum.”