PKF Hospitality Research (PKF-HR) has taken a rosier perspective of the hotel industry, forecasting that rooms revenue for U.S. hotels will rise 7.2% this year – up from the firm's forecast of a 6.9% growth rate, which was published in June.
Given the persistently high levels of unemployment and an apparent waning of consumer confidence, an improved estimate may seem off base, admits R. Mark Woodworth, PKF-HR president.
"However," he says, "after a thorough analysis of the latest lodging performance and economic data, it is tough not to be optimistic regarding the future of U.S. hotels.
"It is understandable why so many industry participants are concerned that the apparent stalling of the U.S. economy will lead to a slowdown in travel, but recent history proves otherwise," Woodworth continues. "Our investigation of the relationships between economic factors and lodging fundamentals reveals some deep high correlations that bode well for future lodging demand and pricing."
According to John B. Corgel, the Robert C. Baker Professor of Real Estate at the Cornell University School of Hotel Administration and senior advisor to PKF-HR, the unemployment rate among educated workers – i.e., those who make up the bulk of the traveling public – is less than 5%. Employed workers are receiving "real wage increases," and real personal income has surpassed its historical peak, Corgel points out.
"Moreover, corporate profits keep soaring to new highs, which add layers of confidence for spending on business travel," he adds.
From the first quarter of 2010 through the second quarter of this year, U.S. lodging demand has averaged quarterly year-over-year gains of 6.9%. For 2011, PKF-HR is forecasting that lodging demand will rise 4.5%, while hotel supply is projected to increase just 0.6%. Looking toward 2012, PKF-HR is forecasting demand will rise another 3.1%, with just a 0.7% increase in room inventory.
With demand growth outpacing supply, PKF-HR expects occupancy for U.S. hotels to increase from 57.6% in 2010 to 59.8% this year and 61.2% in 2012. The improving balance between supply and demand will enable hotel operators to be more aggressive in their pricing policies.
