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PKF Forecasts Record Performance for U.S. Hotels

Thursday June 5th, 2014 - 10:29AM

ATLANTA—According to the June edition of PKF Hospitality Research, LLC’s Hotel Horizons forecast report, the U.S. lodging industry will achieve an occupancy level of 63.6% in 2014, topping the pre-recession peak of 63.1% reported by STR, Inc. in 2006.

Given this balance between supply and demand, R. Mark Woodworth, president of PKF-HR, predicts hotel owners and operators will begin to see real (inflation adjusted) recoveries in average daily rates (ADR) and net operating income (NOI).

“The domestic hotel industry is operating at peak performance. We can stop using the term ‘recovery,’” Woodworth said. “The U.S. lodging industry is at a place in the business cycle where a confluence of market and operational factors will lead to impressive performance on both the top and bottom line. In 2014 and 2015, our firm is forecasting several all-time highs for some of the most important metrics in the hotel business."

By year-end 2015, PKF-HR projects that the U.S. lodging industry will have achieved:

To assess how long the U.S. lodging industry will be able to maintain the current elevated levels of operating performance, PKF-HR examined the factors that derailed industry performance in the past.

“A review of past lodging cycles reveals that five events, either on their own or in some combination, have brought an end to the good times,” said John B. (Jack) Corgel, the Robert C. Baker professor of real estate at the Cornell University School of Hotel Administration and senior advisor to PKF-HR. “Fortunately, some of the factors that have historically triggered the turning point at which cyclical declines commence appear benign, while other factors are entirely unexpected.”

These events include the economy, oil/energy price spikes, asset bubble and overbuilding.

“The one detrimental factor we cannot anticipate is an unpredictable demand shock,” Woodworth said. “The events of September 11, 2001 and the depth of the Great Recession clearly demonstrated that the impact of these types of phenomena on lodging demand and operating profits occurs quickly and can be devastating.”