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PKF: U.S. Hotels Poised To Resume Strong Growth

Wednesday December 18th, 2013 - 9:17AM


ATLANTA—After a slight deceleration in growth during the last half of 2013, PKF Hospitality Research, LLC (PKF-HR) is forecasting very strong gains in revenues and profits for the U.S. lodging industry in 2014 and 2015. 

According to the recently released December 2013 edition of Hotel Horizons, national revenue per available room (RevPAR) is projected to increase by 6.6% in 2014, followed by another 7.5% boost in 2015.  Concurrently, hotel profits should enjoy growth of 12.8% and 14.5% respectively over the next two years.

“As anticipated, RevPAR growth slowed down a bit in 2013 compared to the previous three years,” stated R. Mark Woodworth, president of PKF-HR.  “Entering the year, we knew fears of falling off the fiscal cliff would create uncertainty in the minds of potential travelers.  As the year progressed, the sequester and government shutdown caused additional angst.  However, despite the challenging economic environment, we observed above average growth in lodging demand, average daily rates (ADR), RevPAR and profits.”

PKF-HR estimates that by year-end 2013, lodging demand will grow by 2.1%.  This is greater than the projected 0.8% increase in supply, thus resulting in a 1.3% gain in occupancy. The 62.1% occupancy level estimated for the year surpasses the long-run average of 61.9% as reported by Smith Travel Research (STR).

PKF-HR’s lodging forecasts are driven by economic projections provided by Moody’s Analytics (Moody’s).  According to Moody’s, 2014 is showing all the signs of being a “breakout year.”

“We are very encouraged by Moody’s outlook for the national economy in 2014,” stated John B. (Jack) Corgel, PhD., the Robert C. Baker professor of real estate at the Cornell University School of Hotel Administration and senior advisor to PKF-HR. “As lodging forecasters, it is our role to interpret the economic variables provided by Moody’s and produce projections of hotel performance. Moody’s has identified certain economic factors that we believe will have a very positive impact on the growth of lodging demand and room rates over the next few years.” 

Given the strong outlook for U.S. lodging performance, investment and development interest is high. “The relatively strong recovery of luxury, upper-upscale and upscale hotels located within the nation’s major markets has been well documented.  Therefore, it has not been surprising that these property types are attracting the greatest interest.  Now we are seeing our clients starting to focus on what areas to invest and/or build their upper-priced hotels within these strong markets,” stated Woodworth.