NEW YORK CITY—PwC US is revising down its revenue per available room forecast slightly for 2015 on the heels of lower-than-previously-expected average daily rate growth.
As a result of continued pricing challenges, the firm's outlook for 2015 is reduced to a RevPAR increase of 6.5%, while in 2016, PwC expects RevPAR to grow 5.7%. This year's performance will be driven heavily by occupancy, but next year, ADR will drive the bus.
The estimates from PwC are based on a quarterly econometric analysis of the lodging sector, using an updated forecast released last month by Macroeconomic Advisers and historical statistics supplied by STR and other data providers. Macroeconomic Advisers expects real gross domestic product to increase by 2.2% in 2015, followed by a 2.5% increase in 2016, measured on a fourth-quarter-over-fourth-quarter basis.
Industry occupancy in 2015 is expected to reach levels not seen since 1981, according to PwC, driven by a combination of strong demand momentum and a still-controlled supply environment. However, despite that peak occupancy level, recent trends have pointed to continued pricing challenges as significant ADR growth continues to defy expectations, even though many hotels in many markets are increasingly experiencing sell-out conditions.
In 2016, supply growth is expected to accelerate to 1.9%, with the increase in available hotel rooms reaching the long-term average. As a result, while occupancy levels are expected to begin to stabilize, these peak levels, coupled with increased confidence amongst hotel operators and brands, are expected to support an average daily rate-driven RevPAR increase of 5.7 percent in 2016.
"We are in that part of the cycle where many would have expected ADR growth to be more impactful," admits Scott Berman, principal and US industry leader, hospitality & leisure, PwC. "However, with continued strong lodging demand trends in the US, peak occupancy levels—coupled with the absence of this year's drag on the US dollar—should give hotel operators confidence to continue to drive more room rate growth in 2016."
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Rayna Katz
Rayna Katz is a seasoned business journalist whose extensive experience includes coverage of the lodging sector, travel and the culinary space. She was most recently content director for a business-to-business publisher, overseeing four publications. While at Meeting News, a travel trade publication, she received a Best Reporting award for a story on meeting cancellations in New Orleans during Hurricane Katrina.
