PwC: U.S. Lodging Recovery Remains Steady Amid Economic Uncertainty
By Claudette Covey
August 28, 2012 2:30 PM
Despite persistent economic uncertainty, an updated lodging forecast released by PwC U.S. anticipated revenue per available room (RevPAR) recovery in 2012 to remain intact, with slightly stronger gains in both demand and pricing than previously anticipated. Business and leisure travel continues to recover, with hotels experiencing solid demand and price gains in the second quarter, according to PwC, which based its estimates on quarterly econometric analysis of the lodging sector, using Smith Travel Research statistics and other data providers, and an updated macroeconomic forecast released from Macroeconomic Advisers, LLC. These recent gains, coupled with year-over-year improvement in group bookings currently in place for the balance of the year, off-set slowing related to the near-term weakness in economic fundamentals, the company said. As a result, U.S. RevPAR is now expected to increase 7.2 percent in 2012 and 5.6 percent in 2013.
Macroeconomic Advisers’ August outlook, meanwhile, predicted slower economic growth in 2012 than it previously anticipated, followed by gradual improvement next year, with real gross domestic product increasing 1.8 percent in 2012, followed by an increase of 3 percent in 2013, measured on a fourth quarter-over-fourth quarter basis.
“PwC continues to have an above-consensus outlook,” said Scott D. Berman, principal and U.S. industry leader, hospitality & leisure, PwC. “With occupancy surpassing recent prior peak levels in the luxury, upper upscale, and upscale segments, the lodging recovery is intact.”
PwC’s outlook for RevPAR recovery reflected continued momentum in business travel, including gains in corporate meetings, as well as leisure travel growth that included greater volume from international visitors. Year-to-date RevPAR through July was 7.3 percent ahead of last year, according to the company. Although results for July were weaker (4.3 percent RevPAR growth), in part due to the timing of Independence Day and the start of Ramadan, preliminary results from Smith Travel Research for the first 18 days of August show an approximately 7.2 percent increase in RevPAR. Overall, PwC expects lodging demand in 2012 to increase 3 percent, which combined with still-restrained supply growth of 0.5 percent, is anticipated to boost occupancy levels to 61.5 percent, the highest since 2007.
Hotels spanning the spectrum of price tiers are benefiting from the recovery, with properties in the higher-priced segments expected to experience the strongest gains. Occupancy levels at hotels in the luxury, upper-upscale and upscale segments are expected to meet or exceed each segment’s recent peak in 2007, PwC said. The company added that as stronger business travel and group activity returns to the higher-priced hotels, revenue management strategies are anticipated to drive increased pricing, resulting in a continuation of meaningful RevPAR gains. Hotels in the lower-priced segments, however, have not experienced as solid of a recovery in occupancy, but are still expected to see increased room rates as demand gradually strengthens.