Acceleration in Group Bookings to Drive Highest Occupancy Levels in 20 Years, Says PwC US
NEW YORK, Aug. 25, 2014 /PRNewswire/ -- An updated lodging forecast released today by PwC US anticipates stronger occupancy gains in 2014, setting the stage for 2015, during which PwC US anticipates the highest occupancy levels in 20 years. As the economy rebounded from a weather-related slowdown in the first quarter of 2014, travel activity picked up significantly in the second quarter, resulting in better than expected occupancy performance, and average daily rate results that were only slightly less than anticipated. While transient travel – both commercial and leisure – continues to show steady gains, hoteliers are reporting strong trends in the group segment, which still has room to recover to peak levels. This increased momentum of demand growth in the second quarter and a robust summer travel season also resulted in public lodging companies increasing their guidance on revenue per available room ("RevPAR") growth for the year. This, coupled with continued growth in group demand and steady above-trend economic momentum, supports PwC's expectation of a solid 7.6 percent RevPAR increase in 2014. In 2015, supply growth is expected to accelerate, resulting in decelerating occupancy growth. Still, industry-wide occupancy levels are expected to reach 64.8 percent in 2015, the highest since 1995, giving hotel operators more confidence to push for higher room rates.
The updated estimates from PwC are based on a quarterly econometric analysis of the lodging sector, using an updated forecast released by Macroeconomic Advisers, LLC in August and historical statistics supplied by Smith Travel Research and other data providers. Macroeconomic Advisers expects real gross domestic product ("GDP") to increase 2.0 percent in 2014, and accelerate to 3.1 percent growth in 2015, measured on a fourth-quarter-over-fourth-quarter basis.
Based on this analysis, PwC expects lodging demand in 2014 to increase 4.0 percent, which combined with still-restrained supply growth of 1.0 percent, is anticipated to boost occupancy levels to 64.1 percent. PwC's outlook expects accelerating supply growth of 1.6 percent in 2015, as construction of new hotels gathers momentum (up over 50 percent in the second quarter, compared to the same quarter last year), with supply growth in the higher-priced chain scale segments outpacing growth in the lower-priced segments. Occupancy levels in the lower-priced chain scale segments are expected to approach or exceed prior peak levels, as price-driven compression from higher-priced hotels drives demand to lower priced hotels.
| 2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
2013 |
2014 |
2015 |
||
| Occupancy |
61.3% |
63.0% |
63.2% |
62.8% |
59.8% |
54.6% |
57.5% |
59.9% |
61.3% |
62.2% |
64.1% |
64.8% |
|
| ADR Growth |
4.3% |
5.6% |
7.5% |
6.6% |
2.9% |
-8.6% |
0.1% |
3.8% |
4.2% |
3.9% |
4.4% |
5.7% |
|
| RevPAR Growth |
7.9% |
8.6% |
7.7% |
6.1% |
-2.0% |
-16.6% |
5.4% |
8.1% |
6.6% |
5.4% |
7.6% |
6.9% |
|
| Source: PwC US, based on Smith Travel Research data. |
|||||||||||||
"The strengthening of the group segment thus far in 2014 and a strong summer travel season across all price points is encouraging for future occupancy levels and continued industry growth," said Scott D. Berman, principal and U.S. industry leader, hospitality & leisure, PwC. "We will be closely monitoring the industry's third quarter results to evaluate any change in momentum."
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 184,000 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. Gain customized access to our insights by downloading our thought leadership app: PwC's 365™ Advancing business thinking every day
Learn more about PwC by following us online: @PwC_LLP, YouTube, LinkedIn, Facebook and Google +.
© 2014 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC US refers to the US member firm, and PwC may refer to either the PwC network of firms or the US member firm. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.
SOURCE PwC US
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