The average U.S. hotel is expected to achieve a 2.3 percent increase in net operating income (NOI) this year, spurred on by a strong surge in lodging demand during the first half of 2010, according to Colliers PKF Hospitality Research‘s (PKF-HR) September issue of Hotel Horizons. The news follows a 37.8 percent cumulative decline in profits experienced from 2007 through 2009; it marks the first annual uptick in forecasted NOI since 2007.
“The bottom-line losses suffered by hotel owners over the past two years were devastating, and the repercussions have been, and continue to be, felt throughout the financial community,” says R. Mark Woodworth, president of PKF-HR. “The likelihood that this trauma is coming to an end is welcome news. With occupancy driving the growth in RevPAR in 2010, the rise in profits at this stage is somewhat underwhelming. However, going forward we will begin to see a more profitable formula for revenue growth as operators reclaim pricing leverage and room rates begin to rise. That being said, operators must pay attention to the significant increases in operating costs that we’ve consistently observed during past recovery periods.” PKF-HR forecasts double-digit growth in unit-level NOI each year from 2011 through 2013.
The research firm also forecasts a 4.6 percent increase in revPAR for the U.S. lodging market in 2010. This is the result of a projected 5.2 percent rise in occupancy, but a 0.6 percent decline in ADR. “Our analysis confirms that the sharp rise in demand during the first half of 2010 is partially attributable to the low level of room rates,” Woodworth notes.
For 2011, PKF-HR expects revPAR to increase 5.9 percent, compared with the firm’s 7.8 percent revPAR forecast published in June. In addition, ADR is projected to rise 3.8 percent, while occupancy is forecast to grow 2.1 percent. “It’s not that we are becoming less bullish on 2011,” Woodworth says. “It’s more that the 2010 recovery is happening at a quicker pace.”
