According to the June 2013 edition of Hotel Horizons, PKF Hospitality Research (PKF-HR) projects that U.S. hotels will see a 7.7 percent increase in RevPAR in 2014⎯⎯along with a 15.4 percent boost in net operating income.
“We expect the factors that have inhibited lodging performance during the first half of 2013 will dissipate as the year goes on,” says R. Mark Woodworth, president of PKF-HR. “By 2014, any uncertainty caused by fears of fiscal cliffs and sequestration should be alleviated, thus resulting in improved attitudes among hotel guests, owners and operators.”
Along with a projected increase in supply of just 1 percent in 2014, PKF-HR is forecasting a very strong 3.3 percent growth in lodging demand. The net result is a national occupancy level of 63.8 percent in 2014the highest annual occupancy rate since 1997.
High occupancy levels are most prevalent in upper-tier hotels, where PKF-HR forecasts rates to remain above 70 percent through 2017.
“Throughout the recovery, we have been pleasantly surprised by the surge in demand. That being said, the growth in average daily rates (ADR) has been underwhelming,” says Woodworth. “Starting in 2014, we foresee economic and market conditions that should allow managers to become more aggressive with their pricing policies.” From 2014 through 2016, PKF-HR is forecasting annual ADR growth rates ranging from 5.4 to 6.4 percent.
Prior analysis conducted by PKF-HR found that local market conditions influence 80 percent of a property’s performance. PKF-HR then advises attaining a thorough understanding of the factors that influence the business environments in which their properties operate.
Says Woodworth, “Overall, we remain bullish on the nation’s major lodging markets in 2014. All 50 of the cities we track are expected to enjoy an increase in revenue during the year, but the diversity of the composition of supply, demand, and pricing changes that will fuel the revenue growth is something worthy of further investigation by industry participants as they prepare their marketing plans and budgets for the upcoming year.”
