By August of each year, the budgeting process for most hotel managers is well
underway. Prior analysis conducted by PKF Hospitality Research (PKF-HR) found that 80
percent of a property's performance is influenced by local market conditions. Therefore,
in order to begin to understand how your hotel will perform in the upcoming year, it is
important to appreciate how the overall market in which you operate is expected to
perform.Among the 50 markets covered by our June 2013 Hotel Horizons reports, we
see 2014 revenue per available room forecasts ranging from a low of 2.6 percent (New
Orleans) to a high of 10.2 percent (Oakland, Calif.). This proves the localized nature of
the lodging business. Accordingly, PKF-HR is pleased to present a summary of our local
market forecasts for 2014 to aide U.S. hotel operators in the preparation of their 2014
budgets.SUPPLY AND DEMANDFor most hoteliers, new competition will not be an issue in
2014. In 45 of the 50 Horizons markets, the net change in supply forecast for 2014 is
less than 2 percent. Hotel construction continues to remain most active in New York City
where the lodging supply is projected to increase by 6.6 percent. The impact of the fall
2013 opening of the 800-room Omni Hotel in Nashville, Tenn., is the primary influence
of the 4-percent increase in citywide rooms available during 2014. Other metro areas
expected to see relatively strong gains in supply include Pittsburgh, Philadelphia and
Washington D.C.High economic and regulatory hurdles limit the ability of developers to
construct new hotels in northern California. Therefore, it is not surprising that the
lodging supplies in Sacramento, Calif., Oakland and San Francisco will remain virtually
the same in 2014 compared to 2013.Fortunately for hotel operators in New York,
Pittsburgh, and Nashville, Tenn., PKF-HR is forecasting relatively robust growth in
demand to accompany the strong projections of supply in their respective cities. Also
forecast to enjoy greater than average gains in demand are Tucson, Ariz., and
Charlotte, N.C. While lodging demand is forecast to decline by 1.7 percent in Oahu
during 2014, the occupancy level for the market is projected to remain above 80
percent.OCCUPANCY, ADR AND REVPARThe combination of a 4.7-percent increase in
demand with a 0.3-percent increase in supply will result in a nation leading forecast
boost to occupancy of 4.3 percent in Tucson during 2014. Also projected to enjoy strong
gains in demand, combined with minimal increases in supply, are the Kansas City, Mo.,
and Minneapolis lodging markets.Occupancy levels in Oahu, Newark, N.J, and New York
are forecast to decline in 2014, but remain above 70 percent. Demand growth less than
one percent will result in declining levels of market occupancy for hoteliers in New
Orleans and St. Louis.The best news for hotel managers in 2014 is the projections of
strong average daily rate growth. All 50 Horizons markets are forecast to achieve ADR
increases greater than Moody's Analytic's 2.5-percent forecast for inflation in 2014. ADR
growth in excess of inflation typically leads to significant gains in profits.Limited new
competition should allow hotel operators in Oakland, Calif., and San Francisco to push
room rates aggressively in 2014. Down in Texas, the surge in oil and gas production will
provide a healthy economic environment and enable hoteliers in Dallas and Houston to
raise room rates by 7.1 percent.For the most part, ADR growth is the primary factor
driving RevPAR gains in the markets forecast to achieve the greatest increases in
revenue in 2014. Conversely, limited or declining occupancy levels are inhibiting
revenue increases in the markets forecast to lag in RevPAR growth.BULLISH FOR
2014PKF-HR is bullish regarding the outlook for the nation's major lodging markets in
2014. All 50 of the markets we track are expected to enjoy an increase in revenue
during the year, but the diversity of the composition of supply, demand, and pricing
changes that will fuel the revenue growth is something worthy of further investigation by
industry participants as they prepare their marketing plans and budgets for the
upcoming year.