Average Daily Rate Growth Continues To Lag Expectations Despite Peak Occupancy Levels, Says PwC Us
An updated lodging forecast released today by PwC US expects revenue per available room ("RevPAR") growth in 2015 to be driven more by occupancy than previously expected, as average daily rate ("ADR") growth continues to look for a firm footing. Recent performance of the lodging industry has surprised industry participants, as solid ADR growth has struggled despite peak occupancy levels, which was expected to have given operators the...
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 October, and historical statistics supplied by STR and other data providers. Macroeconomic Advisers expects real gross domestic product ("GDP") to increase 2.2 percent in 2015, followed by a 2.5 percent increase in 2016, measured on a fourth-quarter-over-fourth-quarter basis.
Based on this analysis and recent demand trends, which continue to be strong, industry occupancy in 2015 is expected to reach levels not seen since 1981, driven by a combination of strong demand momentum and a still-controlled supply environment. Despite peak occupancy levels, recent trends have pointed to continued pricing challenges as more significant ADR growth continues to defy expectations, even though many hotels in many markets are increasingly experiencing sell-out conditions. In 2016, supply growth is expected to accelerate to 1.9 percent, with the increase in available hotel rooms reaching the long-term average. As a result, while occupancy levels are expected to begin to stabilize, these peak levels, coupled with increased confidence amongst hotel operators and brands, are expected to support an average daily rate-driven RevPAR increase of 5.7 percent in 2016.
"We are currently in that part of the cycle where many would have expected ADR growth to be more impactful" said Scott D. Berman, principal and U.S. industry leader, hospitality & leisure, PwC. "However, with continued strong lodging demand trends in the US, peak occupancy levels, coupled with the absence of this year's drag on the US Dollar, should give hotel operators confidence to continue to drive more room rate growth in 2016".
About PwC US
PwC US helps organizations and individuals create the value they're looking for. We're a member of the PwC network of firms in 157 countries with more than 195,000 people. We're committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at www.pwc.com/US. PwC refers to the US member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.
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