U.S. hotel occupancy rates will continue at record levels through 2017, according to a quarterly report from PKF Hospitality Research (PKF-HR),
“The fundamental characteristics of the economy remain relatively unchanged, as the labor market continues to improve and GDP growth remains steady if moderate,” says R. Mark Woodworth, senior managing director of PKF-HR. “Based on what we do know and feel comfortable forecasting, the probability of an economic downturn in U.S. hotel industry performance remains remote.”
The forecast indicates that consumer demand for hospitality accommodations will exceed the change in supply over the next two years, resulting in a national occupancy rate of approximately 66 percent in both 2016 and 2017.
For 2016, room rates are projected to increase by 5.5 percent, followed by a 5.8 percent rise in 2017. “Given the modest growth projected for inflation, real ADRs are now returning to their previous peak.”
Since real ADR recovery has historically sparked new supply, PKF-HR anticipates an increase in development, with over two-thirds of properties being constructed in the upscale or upper-midscale chain categories.
Several secondary markets were among the top 15 cities for occupancy increases. “At this point in the cycle, the top tier cities are approaching all-time highs, limiting the potential for continued occupancy gains,” says Woodworth. “A classic example is the San Francisco market, where occupancy declined by 0.9 percent in the third quarter, but the occupancy level achieved was 90.3 percent.”
Hotels in the West Coast and Mountain West regions lead the nation in ADR growth, while airport and resort hotels experienced the strongest RevPAR growth during the third quarter of 2015, with a 7.6 percent gain for resort hotels and an 8 percent gain for airport hotels and. Urban and interstate hotels lagged behind with respective increases of 3.9 percent and 4.1 percent.