I had the good fortune of presenting our data at the annual ALIS Summer Update in Dallas. The event’s organizer, Jim Burba, uses the mid-year meeting as a gathering ground for topics that will be presented and debated at future ALIS conferences, which next year will take place in L.A. But while he has assembled the usual A-list of heavy hitters in the hotel real-estate space, he is also convening a mini ALIS conference to show owners and operators how the first half of the year has progressed. As usual, the STR and PKF data was presented, this year with the added benefit of Scott Berman from PricewaterhouseCoopers showing the progression of our respective forecasts over time.
Obviously, as the data changes, so does the forecast. But what is interesting in this case is how the movements have occurred. In January of this year, STR (the parent company of HotelNewsNow.com) projected the revenue-per-available-room change for 2011 to be 6.1% based on strong growth in average daily rate and moderate growth in occupancy. We are now suggesting this forecast was too bearish, that the occupancy growth, based on very solid demand fundamentals, will be twice as strong as previously thought (now: 3.8%) . At the same time, we moderately decreased our ADR growth rate to a flat 4%. Summing this up, we are now expecting RevPAR to grow around 8% for the year.
View my ALIS Summer Update presentation as a PDF. (Free regisration/log-in required.)
In January in San Diego, PKF forecasted ADR growth this year of around 4.6% (compared to STR’s forecast of 4.2%) and RevPAR growth around 9% (compared to our 6.1%). Professor Jack Corgel then showed that PKF expects hoteliers to really put the brakes on the recovery and increase ADR by only 2.4%, almost slashing their old ADR forecast in half (Aside: What a cool experience to share the stage with a professor from my alma mater who taught my cohorts the intricacies of real-estate finance—definitely an honor and a pleasure). Which then leads to the PKF RevPAR forecast of “only” 6.9% for 2011.
Read more coverage from the ALIS Summer Update:
• Rebound? or Rebound! Only time will tell
• Panel: Cost cuts were fruitful; don’t let them spoil
• Data crunchers: Recovery chugs on
So, while our forecast got progressively more aggressive, the PKF numbers got more muted. The team at PKF takes its cues from the good folks at economy.com, and we use Oxford Analytics for our macroeconomic inputs. But I think the main difference in point of view is not only one about the economy at large but also of the way we assess hoteliers’ willingness to increase room rates. We have always hoped operators would take their cues from the strong demand rebound and negotiate room rates for the remainder of the year from a position of strength. While we still hope that may be the case, PKF suggests the industry’s stance with regards to ADR is a lot less solid. Nothing wrong with an honest disagreement among friends (well, among professor and former student), but for the sake of the industry profitability I hope we are right.
For 2012, we forecast ADR growth around 6% while PKF suggests 5.5%—certainly numbers in the same ballpark. We estimate next year’s RevPAR growth at around 8.1%; the PKF number is only slightly higher at around 8.7%. As the data changes, we will adjust our forecasts, but so far it looks that our thoughts about 2012 are in synch. I guess I will chalk that up to great minds thinking alike.
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