Events/Trade Shows

IHMRS panel: Occupancy strong, ADR still catching up and "travel is back"

14 Nov, 2011 By: David Eisen

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PKF's Mark Woodworth

NEW YORK — What does the hotel industry look like now and how is it shaping up for 2012? These were two of the questions that a panel of lodging industry data-collection agencies were tasked with answering—or, rather, prognosticating on—during a session at the International Hotel, Motel & Restaurant Show at the Javits Center in New York City.

While the hotel industry is assuredly in rebound mode, with occupancies back nearly to peak levels, average daily rate has failed to keep stride. "Our industry is breaking records on rooms sold," said Vail Brown, VP, global sales and marketing, STR, adding that since STR began collecting data, the first three quarters of 2011 saw the most combined rooms ever sold. "However, it will probably be two years before ADR is fully back."

Brown added that the slow growth in new supply was also an impetus for the strong demand recovery.

Post-recession, it was no surprise that the top five U.S. cities (New York, Boston, Miami, San Francisco, Los Angeles) recovered first. STR said that occupancy rate only declined to 68 percent in those destinations as a whole. During the recessions, Brown said ADR was down $150 in those markets, but they are now driving rate recovery. "New York is showing strong rate growth since the beginning of the year," Brown said, adding that discounting in 2010 killed profits, which were a staggering $10 billlion off peak.

Warren Marr, managing director of PricewaterhouseCoopers' hospitalty and lesiure consulting services, said that expectations have improved over the last three months, noting that "travel is back." He also concurred with Brown, stating that while demand growth is stronger, "rate is not following."

Marr said that hotels expect to regain pricing power beginning late this year into 2012. PwC said that demand in 2011 was up 4.8 percent and forecasts that it will rise 1.6 percent more in 2012. "Improved pricing will drive RevPAR growth across all segments," Marr said, adding that gains in RevPAR this year have come from improved occupancy rates. PwC forecasts RevPAR growth of 6.5 percent in 2012.

Meanwhile, Mark Woodworth, president of PKF Hospitality Research, began his presentation with a question: "How do you feel?" he asked the audience, to which the reply was a mix. Perhaps it is due to this notion that PKF presents: average room night demand is linked to employment (the unemployment rate in the U.S. was 9 percent as of last month).

In 2012, Woodworth sees a weaker first half and a stronger second. As a whole, PKF forecasts 2012 shaping out thusly: supply growth (up 0.7 percent); demand (up 2.7 percent); occupancy rate (60.8 percent); ADR (up 4.7 percent); RevPAR (up 6.2 percent).

Echoing STR, PKF's Woodworth said that in the second quarter of 2011, in 44 of the top 50 markets, more rooms were sold than ever before. "We are positioned to have meaningful ADR increases," Woodworth said.

While Woodworth was optimistic about growth, he did present a doomsday scenario if theere was any economic disturbance that could lead to a double-dip recession. In that case, real RevPAR change was forecasted to decrease by 0.5 percent.

On the supply side, Patrick Ford, president of Lodging Econometrics, informed the hopeful audience that the economy "will not reverse direction." In the third quarter, Ford said there were 2,851 projects totaling 348,000 rooms under construction. While new projects fell rapidly, Ford said the pipeline is up in Q3 2011 over the same time last year.

Not surprisingly, New York leads the way with 5,644 rooms under construction as of the third quarter.

 

Topic : IHMRS, Lodging Panel, Trends, Economy, Hospitality Industry
External Source : Hotel Management