U.S. Hotels To Enjoy Well-Above Average Levels Of Revenue Growth Through 2018
By Christine Kern, contributing writer
Positive Market and Economic Conditions to Sustain Longest Period of Growth in 20 Years
U.S. hotels have realized significant increases in occupancy, average daily rate (ADR), and top-line revenue over the past five years, and PKF Hospitality Research (PKF-HR), a CBRE company, is forecasting a protracted period of prosperity for the U.S. lodging industry, according to a Hotel News Resource.
The increase is due, in part, to an improving economy, increased levels of international travel, a recovery in the total number of people working, and limited supply growth in the majority of U.S. markets, concludes the September 2014 edition of PKF Hospitality Research’s (PKF-HR) Hotel Horizons
According to the survey, the U.S. lodging industry will see a 65 percent occupancy rate in 2015, which would mark the highest occupancy rate since the STR, Inc. began reporting data in 1987.
“An ever-improving economy, and the favorable relationship between supply and demand, have led to significant growth in both revenues and profits from 2009 to the current year. We expect this trend to continue through 2017,” R. Mark Woodworth, president of PKF-HR said in a release. “The 1990s were the only other time we observed such a sustained confluence of positive economic and market conditions.”
As U.S. hotels achieve all-time high occupancy levels, PKF-HR forecasts that hoteliers should be able to raise their average daily rates (ADR) at an average annual pace of 5.7 percent from 2015 through 2017. This is contrary to the forecast of Moody’s Analytics, PKF-HR’s source for economic projections, which set the annual pace of inflation to average just 2.5 percent.
“The best news for U.S. hotel owners and investors is that the combination of high occupancy levels and significant real ADR growth will perpetuate strong bottom-line gains. PKF-HR is projecting the current three year streak of double-digit gains in net operating income (NOI) to continue through 2016,” Woodworth noted. “We have not seen six years of such strong and sustained profit growth in the 78 years PKF has been tracking the U.S. lodging industry.”
“Based on previous research conducted by our firm, we know that hotel budgets, as well as PKF-HR’s forecasts, are most accurate during the current ‘sweet spot’ phase in the business cycle. All industry participants should have a high degree of confidence that the business environment will offer the potential for strong lodging industry performance in the next few years,” Woodworth concluded.