NEW YORK—An updated lodging forecast by PwC U.S. expects another year of solid RevPAR growth in 2015, with an increase in occupancy levels that was stronger than previously expected, offset by growth in room rates that was softer than anticipated.
Despite weak U.S. economic performance driven in part by unseasonably harsh winter weather conditions, the U.S. lodging sector registered solid demand performance during the first quarter of 2015, with a year-over-year increase in RevPAR of 8%, and increasing demand levels driving RevPAR increases to a larger extent than previously anticipated, according to PwC.
PwC expects this positive momentum in demand to continue for the remainder of 2015, supporting a RevPAR increase of 7% in 2015. In 2016, PwC expects RevPAR to grow 6.1%, driven almost entirely by ADR.
The estimates from PwC are based on a quarterly econometric analysis of the lodging sector, using an updated forecast released by Macroeconomic Advisers, LLC in April and historical statistics supplied by STR and other data providers. Macroeconomic Advisers expects real gross domestic product to increase 2.8% in 2015, followed by a 2.5% increase in 2016, measured on a fourth-quarter-over-fourth-quarter basis.
Based on this analysis and recent demand trends, PwC expects industry occupancy in 2015 to reach levels not seen since 1981, with a number of factors contributing to the continued increase in these levels, including the expansion of online distribution channels, which have helped hotel operators fill rooms during more off-peak periods. ADR growth is expected to remain somewhat controlled for the balance of this year partly due to the impact of the increased value of the U.S. dollar, which is expected to restrict the level that hotel operators are able to raise rates, primarily in certain gateway markets that cater to inbound international leisure visitors, according to PwC.
Supply growth is starting to get more meaningful, reported PwC, and is expected to accelerate to 2.2% in 2016, with the increase in available hotel rooms exceeding the long-term average of 1.9% for the first time since 2009. As a result, while occupancy levels are expected to begin to stabilize, these peak levels, coupled with the absence of this year’s drag from the U.S. dollar, is expected to support an ADR-driven RevPAR increase of 6.1%, according to PwC..
“With robust travel activity in the United States, both group and transient demand continue to exhibit positive momentum contributing to occupancy levels not seen in the last 30 years,” stated Scott D. Berman, principal and U.S. industry leader, hospitality and leisure, PwC. “Average daily rate growth has lagged expectations in the current cycle, but is expected to pick up next year as peak occupancy levels persist. Nevertheless, we will be monitoring several macroeconomic indicators, particularly currency fluctuations this summer to gauge impact on U.S. lodging fundamentals.”