PKF-HR: Hotel Profit Growth Returns

Based on the strong surge in lodging demand that occurred during the first half of the year, Colliers PKF Hospitality Research (PKF-HR) now forecasts that the average U.S. hotel will achieve a 2.3% increase in net operating income (NOI) during 2010. This follows a 37.8% cumulative decline in profits experienced from 2007 through 2009, and is the first annual uptick in forecasted NOI since 2007.

‘The bottom-line losses suffered by hotel owners over the past two years were devastating, and the repercussions have been, and continue to be, felt throughout the financial community,’ says R. Mark Woodworth, president of PKF-HR. ‘The likelihood that this trauma is coming to an end is welcome news. With occupancy driving the growth in [revenue per available room (RevPAR)] in 2010, the rise in profits at this stage is somewhat underwhelming. However, going forward we will begin to see a more profitable formula for revenue growth as operators reclaim pricing leverage and room rates begin to rise.’

PKF-HR forecasts double-digit growth in unit-level NOI growth each year from 2011 through 2013.

The improved outlook for 2010 bottom-line performance is the result of increasing optimism about the top line, PKF-HR says. In the recently released September 2010 edition of Hotel Horizons, the firm's analysts forecast a 4.6% increase in RevPAR for the U.S. lodging market this year. This is the result of a projected 5.2% rise in occupancy, but a 0.6% decline in average room rates.

SOURCE: Colliers PKF Hospitality Research


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