U.S. RevPAR forecast for ’13, ’14 goes higher: PwC

An updated U.S. lodging forecast released on Tuesday by PwC US shows favorable gains in hotel performance are continuing in the second half of 2013. Assuming a fiscal policy resolution is reached, PwC said improving economic conditions are expected to help support further hotel performance gains next year.

Occupancy levels at higher-priced hotels are ahead of prior peak levels, industry RevPAR is above its prior peak, and hotel construction activity, while rebounding, is still quite limited. As demand continues to outpace supply growth, and economic conditions strengthen, PwC expects growth in occupancy and average daily rate will continue, resulting in RevPAR growth of 5.5% in 2013, and improving to 5.9% in 2014.

The updated estimates from PwC are based on a quarterly econometric analysis of the lodging sector, using an updated forecast released by Macroeconomic Advisers in October and historical statistics supplied by Smith Travel Research and other data providers. Macroeconomic Advisers expects real gross domestic product GDP to increase 1.9% in 2013, and accelerate to 3.2% growth in 2014, measured on a fourth-quarter-over-fourth-quarter basis.

Overall, based on the analysis referenced above, PwC expects lodging demand in 2013 to increase 2%, which combined with still-restrained supply growth of 0.9% by year-end, is anticipated to boost occupancy levels to 62.2%, the highest since 2007.

Although business leaders remain cautious, investment spending continues to grow, and companies are planning group meetings, with stronger bookings in place for 2014. Increased occupancy levels are expected to give operators further confidence to drive increased pricing, resulting in a solid 4.6% increase in ADR in 2014. Among chain scales, luxury hotels are experiencing the strongest performance gains, and are on track for 74.4% occupancy in 2013, despite a 25.5% increase in supply between year-end 2007 and year-end 2010.