Reflecting stronger lodging demand and economic activity that exhibits less retrenchment than expected, an updated lodging forecast released today by PwC US anticipates stronger revenue per available room ("RevPAR") recovery in 2013, compared to the previous outlook.
Lodging demand growth, which had eased in the third quarter of 2012 on a seasonally adjusted basis, gained more strength than expected in the fourth quarter. While some of the lodging demand fluctuations are attributable to the timing of holidays and Superstorm Sandy, the underlying momentum in the travel recovery remains intact. As a result, PwC expects RevPAR growth of 5.9% in 2013, representing the fourth year of lodging recovery.
The updated estimates in PwC Hospitality Directions U.S. are based on a quarterly econometric analysis of the lodging sector, using historical statistics supplied by Smith Travel Research and other data providers, and an updated macroeconomic forecast released by Macroeconomic Advisers, LLC.
Macroeconomic Advisers' December outlook anticipates slightly weaker economic growth in the first half of 2013, reflecting on-going fiscal contraction and policy wrangling, uncertainty regarding the Eurozone crisis, and still-impaired bank and household balance sheets, followed by stronger economic growth in the second half of the year. As a result, Macroeconomic Advisers, LLC now expects real gross domestic product ("GDP") to increase by 2.6 percent in 2013, measured on a fourth-quarter-over-fourth-quarter basis.
Despite the near-term economic challenges, lodging demand and, more importantly, pricing, are expected to remain on positive trajectories. Overall, based on the analysis referenced above, PwC expects lodging demand in 2013 to increase 1.8 percent, which combined with still restrained supply growth of 0.8 percent, is anticipated to boost occupancy levels to 62.0 percent, the highest since 2007.
While hotels across the spectrum of price tiers are expected to benefit from this recovery, hotels in the higher-priced segments are expected to experience the strongest gains. Occupancy levels at hotels in the luxury, upper-upscale and upscale segments have already exceeded pre-recession peaks. As stronger business transient and group activity returns to higher-priced hotels, revenue management initiatives are anticipated to drive increased pricing of available hotel rooms, resulting in a continuation of meaningful RevPAR gains. Hotels in the lower-priced segments have not experienced as solid of a recovery in occupancy, but are still expected to realize increased room rates as demand gradually strengthens.
2007 2008 2009 2010 2011 2012 2013
Occupancy 62.8% 59.8% 54.6% 57.5% 59.9% 61.4% 62.0%
ADR Growth 6.7% 3.0% -8.7% 0.0% 3.8% 4.2% 4.8%
RevPAR Growth 6.1% -2.0% -16.7% 5.4% 8.2% 6.8% 5.9%
Source: PwC and Smith Travel Research.
A full copy of PwC's US Lodging Forecast can be accessed here.