HENDERSONVILLE, Tennessee—The face of the U.S. hotel industry’s recovery is taking on a different look.
According to STR’s revised forecast for 2010 and 2011, recovery could be influenced by things such as tax changes and health-care reform. The means a rebound will come quicker in 2010 but could get slow as 2011 unfolds.
“We think the recovery will pick up its pace during the second and third quarters of this year, then it will moderate,” said Mark Lomanno, STR’s president.
The results of that thought process: Occupancy in 2010 will increase 1.9 percent to 55.8 percent (the previous forecast was for flat occupancy); average daily rate will decline 2.3 percent (the previous forecast was for ADR to decline 3.2 percent); and revenue per available room will decrease 0.5 percent (the previous forecast was for RevPAR to drop 3.2 percent).
The forecast for key metrics
| |
New 2010 forecast |
Year over year % change |
Old 2010 forecast* |
New 2011 forecast |
Year over year % change |
Old 2011 forecast* |
| Occupancy |
55.8% |
+1.9 |
55.1% |
56.8% |
+1.9 |
56.3% |
| ADR |
$95.45 |
-2.3 |
$94.39 |
$98.79 |
+3.5 |
$96.28 |
| RevPAR |
$53.22 |
-0.5 |
$51.99 |
$56.12 |
+5.4 |
$54.18 |
*old forecast was distributed in January 2010
Click here to download STR's revised forecast slides (free registration/login required).
Lomanno said the most important reason for dramatic changes in the forecast can be traced to better-than-previously-anticipated occupancy rates.
“Given the developing trends, we moved up the time frame for demand recovery,” he said. “The easy comparisons to last year’s performance in the first three months will show significant demand improvements over 2009. With that will come a little stronger ADR growth.”
One aspect that shouldn’t be dismissed is that a positive atmosphere can produce some improvement, according to Lomanno.
“Pricing is as much about psychology as it is about facts,” he said. “When people see demand growth numbers in the 4-, 5- or 6-percent range for a few months, it will embolden them to increase ADR.”
Demand side
Contrary to previous thinking, STR now believes demand growth will be stronger in 2010 than in 2011. The company said demand will grow 4.1 percent in 2010 and 2.9 percent in 2011. When STR crunches March 2010 data in the middle of April, it is expected that it will emerge as the fourth consecutive month to show demand growth.
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Mark Lomanno
president, STR
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“The recovery will slow down late in the fourth quarter of 2010 and in early 2011,” he said. “2.9-percent demand growth in 2011 is nothing to sneeze at. It’s double the 20-year average for demand growth (1.4 percent), but there are some external forces at work that have caused the demand cycle to be altered.”
Lomanno said the belief is that 2011 will be a much more cumbersome year tax wise than 2010, so companies will accelerate business as much as possible in 2010, recognizing they will pay more taxes in 2011 because of new government obligations.
“In this kind of recovery, the real engine that will propel it on an upward trajectory will be jobs growth, which hasn’t happened yet,” he said. “When job growth comes back, that’s when real demand growth will kick in.”
Lomanno said the Hendersonville-based company expects group business to return to hotels by 2012 or 2013, but a portion of what it was during the peak years of 2006, 2007 and 2008 won’t ever return.
