Statistics Point to a Down Year for Lodging

A New Year brings healthy living resolutions, cold weather throughout most of the country and a deluge of predictive reports on what is going to happen in the coming year in the lodging industry. A scan of those outlooks paint a dark picture of what hoteliers can expect in 2009.

• Melding statistics from Smith Travel Research and current forecasts for the US economy, PricewaterhouseCoopers LLP predicts an 11.2% drop in RevPAR in 2009, which comes after RevPAR declined only 1.9% in 2008. Behind that double-digit plunge is an anticipated 3.9 percentage point decrease in occupancy to 56.5% due to declining demand. That slump in heads in beds, combined with fewer guests gravitating toward higher-priced hotels, is expected to result in a 5.2% reduction in average daily rate.
• Meanwhile, PwC’s former lodging industry practice leader, Bjorn Hanson, now a clinical associate professor at the NYU Tisch Center for Hospitality, Tourism and Sports Management, says after spending a record amount on capital expenditures last year, hotel owners will put on the brakes on sprucing up their properties in ’09. He forecasts that the CapEx total for this year will hit $3.75 billion, a plunge of 30% from the $5.5 billion that was spent in 2008.
• If capital expenditures are down this year, it’s probably because more hotel owners will encounter problems paying their debt. According to PKF Hospitality Research, the number of full-service hotels in the US with insufficient cash flow to cover their debt is expected to rise by 25% this year. Mining its propriety database of 6,000 financial statements, PKF found that an estimated 15.9% were unable to generate sufficient cash from operations to cover debt service payments in 2008. Based on current RevPAR and NOI predictions, the firm anticipates that number will rise to 19.9% by the end of this year.