NASHVILLE, Tennessee— Despite strong increases in demand, U.S. hoteliers should tread lightly heading in 2013, according to data research firms during Thursday’s closing session at the Hotel Data Conference.
The outlook in both the U.S. and Europe is fraught with risks, said Amanda Hite, president of STR, parent company of HotelNewsNow.com.
The uncertainty of who will win the upcoming U.S. presidential election is one of them, she said. The sluggish labor market and the state of the overall economy are additional causes for concern.
And as for Europe, “there’s no good news there,” Hite said, adding there is a high level of risk for hotels operating in several of the eurozone countries.
While David Kong, president and CEO of Best Western International, agreed there are risks, he said these factors are not impacting the U.S. hotel industry right now.
“If you look at the international arrivals to the country or to Best Western, we are hitting record highs. It doesn’t seem like what’s happening in Europe is impacting our business,” Kong said.
However, that doesn’t mean he and his team are ignoring the warning signs.
“It behooves us to have a plan … in case the bomb falls out,” Kong said. Executives of the company have contingency plans at the corporate level that will allow them to react quickly in case of an economic crisis.
Kong said Best Western encourages its hoteliers at the local level to have plans in place as well.
“Every hotel owner needs to be concerned about the economy and where the stock market is heading,” he said. “If you look at the general stock market direction, you can tell where the hotel industry is going to go.”
Reasons for continued optimism
Aran Ryan, director of the PricewaterhouseCoopers’ hospitality and leisure team, said the industry is seeing a normalization of certain travel patterns.
Businesses are continuing to make investments in software and equipment, and hotel demand is in line with that trend, he said. And although the pace is not as strong as one would like, PwC expects demand will continue to grow.
On the consumer side, “there’s a gradual positive trend,” Ryan said.
“Consumers are spending more on lodging over time. Travel has really demonstrated its importance in life and in commerce. Travel is important to people,” Ryan said. “It is increasing.”
In terms of hotel demand, STR is not seeing a similar growth pattern as PwC.
“We have growth at 0.5% for supply and 2.6% for demand this year,” Hite said.
For the remainder of the 2012, STR is forecasting an occupancy increase of 2.1%, a 4.4% rise in average daily rate to $106.19 and revenue per available room to be up 6.5%.
For 2013, Hite reported the company sees a 0.3% increase in occupancy, a 4.6% rise in ADR to $111.03 and RevPAR to increase 4.9%.
With the growth in ADR, the industry will hit the peak rates it experienced in 2008. However, that does not take inflation into account, Hite said.
RevPAR growth will be driven purely by rate, “because we do expect to see demand declines,” she said.
PwC’s outlook has occupancy increasing 2.6%, ADR growing by 4.6% and RevPAR rising 7.2% for the remainder of 2012.
In 2013, Ryan reported the company is forecasting a 0.6% rise in occupancy, a 4.9% growth in ADR and a 5.6% increase in RevPAR.
PKF Hospitality Research
Mark Woodworth, president of PKF Hospitality Research, predicted occupancy will hit 61.4% for the remainder of 2012, ADR will go up 4.2% and RevPAR will increase 6.7%.
For 2013, PKF is forecasting occupancy will increase 62.1%, ADR will grow 5% and RevPAR will rise 6.2%.
The upper scales of the chain-scale segments will see the most growth, Hite and Ryan said.
STR is predicting luxury will grow 9% in 2012 and 8.6% in 2013, while PwC puts luxury increases at 9.4% for 2012 and 6.8% for 2013.
In terms of a “recovery,” Woodworth said the word needs to be defined as the point when real ADR returns to its previous peak by taking inflation into account.
A quarter-by-quarter look at the past two recessions helped the research firm forecast when ADRs will recover this cycle.
After the 1991 recession, it took six years and three quarters for the industry to get back to its previous peak in ADR. And after the 2001 recession hit, it took six years to restore its ADR to previous levels.
But this recession is showing something different, Woodworth said. “Demand has come roaring back, but price hasn’t really moved, so that’s a very different outcome from what we’ve seen before.”
PKF is predicting this dip in the cycle will last for seven years and three quarters. Real ADR won’t recover until the third quarter of 2015.