7.20.15: PKF Hospitality Research Issues U.S. Lodging Forecast

The outlook for the U.S. lodging industry continues to be extremely strong, according to the recently released June 2015 edition of PKF Hospitality Research’s (PKF-HR, a CBRE company) Hotel Horizons®. The report forecasts that U.S. hotels will continue to enjoy revenue per available room (RevPAR) growth more than twice the long-run average (up 7.2% in 2015 and 6.8% in 2016). The slowdown in 2016 should not worry hoteliers because growth in the average daily room rate (ADR) will drive the increase in RevPAR, which ultimately is more profitable for hoteliers.

The June 2015 Hotel Horizons® forecast has not changed much from the March 2015 forecast. In March 2015, PKF-HR forecast RevPAR growth of 7.3% for 2015 and 6.5% for 2016. The consistency of the forecasts is an indication that the U.S. lodging industry is now in that part of the business cycle where performance is highly predictable. Predictable performance means different things for each participant. Operators can efficiently schedule their staff. Owners can more confidently project their cash flows. Investors and lenders can make their investment decisions assuming a relatively low-risk environment.

While the outlook for the industry has not changed much, current events are always evolving and need to be taken into consideration. During the first quarter of 2015, lodging demand grew at a very healthy 4.2%. However, this was less than the PKF-HR forecast of 5.1%.

The over estimation of first-quarter 2015 demand growth can be attributed to a combination of economic and non-economic factors. Extreme winter weather had a negative impact on hotel performance in Boston, New York and Chicago. Low oil prices have suppressed gasoline prices, but impaired local economies in the North and South Central regions of the country. Finally, the surge in the value of the U.S. dollar has hurt exports and caused some contraction in manufacturing. Fortunately, we have yet to see any significant declines in inbound overseas travelers.



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