Unit-Level Hotel Profits Grew 7.2% in ’07; Slowdown Ahead: PKF Report

ATLANTA—PKF Hospitality Research has found the average hotel enjoyed a 7.2% gain in net operating income in 2007, more than twice the pace of inflation for the year, but the single-digit gain was the lowest year-over-year increase since 2004. According to PKF-HRS 2008 edition of Trends in the Hotel Industry survey, the data is evidence of a projected slowdown in hotel income that PKF is forecasting for the near future.  “Throughout 2007, hotel owners and operators were increasingly concerned about downtrending occupancy levels compared to 2006 and a slower pace of ADR growth, and their potential impact on 2007 profitability. Despite these concerns, year-end results indicated that the typical U.S. hotel was able to achieve gains in revenue and profits above their respective long-term averages,” said Mark Woodworth, president/PKF Hospitality Research.  “[This year] may be a different story in view of the difficult economic outlook for the remainder of this year, and the dampening effect it will have on U.S. hotel revenue growth.  Managers will be hard pressed to grow profits in 2008.” According to Smith Travel Research, RevPAR was up 1.9% through first-quarter 2008 compared to the same period in 2007.  For second-quarter 2008 PKF-HR is forecasting an annual increase in RevPAR of 1.5%  This RevPAR forecast is the result of a projected 2.5% decline in occupancy, combined with a 4% increase in ADR. PKF-HR is forecasting that a 1.5% gain in RevPAR will translate to a 1% increase in total revenue for 2008.

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