Industry Research
November 11th, 2012 | David Eisen

IHMRS: Sandy's effects felt, but not a death knell for hotel industry

11 Nov, 2012 By: David Eisen


John Campbell, GM, La Jolla Beach & Tennis Club, moderated the AH&LA Fall Conference panel that included hotel industry market forecasters.

NEW YORK CITY--While Hurricane Sandy inflicted an inordinate about of damage on the most densely populated portion of the U.S., the hotel industry should still see gains this year, according to a U.S. lodging industry panel at the AH&LA Fall Conference held in conjunction with the International Hotel, Motel and Restaurant Show at the Jacob Javits Center in New York.

"Despite Sandy, the underlying trajectory of travel remains," said Warren Marr, managing director, PwC. 

Mark Woodworth, president of PKF Hospitality Research, said that Moody's estimated that the hurricane's damage on the leisure and hospitality business would be in the neighborhood of $500 million, part of a total of $50 billion in overall damage. 

Nonetheless, Marr said that despite macroeconomic uncertainty, hotels are expected to continue to regain pricing power through 2013. According to PwC forecast numbers, hotel demand will increase 1.7 percent in 2013, while supply will continue to see minimal growth of .5 percent. Meanwhile, in 2013, average daily rate is expected to increase 4.4 percent—up .3 percent from 2012—with occupancy only rising .9 percent, well below 2012 gains of 2.4 percent. The numbers, PwC said, should lead to slightly muted growth in 2013 revenue per available room at 5.4 percent. PwC forecasted 2012 RevPAR to increase 6.6 percent.

Marr said that RevPAR forecasting was quite stable through June 2012, at a rate of around 6.5 percent. That was until August when PwC increased its RevPAR prediction to 7.2 percent. Then Sandy came, Marr said.

"In 2013, RevPAR will be rate-driven," Marr said, adding that group demand will also improve in 2013. However, "increased room rate was less of a driver in RevPAR growth in 2012," he said.

In terms of chain scales, luxury shoud be the biggest RevPAR gainer in 2013, Marr said, at 6.8 percent. Vail Brown, STR's VP, global business development and marketing, noted that luxury peaks bring the other chain scales up.

Chugging along
Brown also gave a glimpse into the global state of affairs, noting a current recovery in the Middle East and Africa after sharp declines, before pivoting to the U.S., where she said September was a good month, with occupancy up 2.6 percent to 63 percent, notwithstanding double-digit declines in occupancy in Washington, D.C., and Boston. 

With regard to Sandy, Brown said STR wouldn't have the complete picture until later this week.

Overall, she said, demand is far outpacing supply and has been doing so for the past 25 months. Same for ADR, which is outpacing occupancy. "ADR is growing at a faster pace," Brown said, "but is flattening out."

In terms of specific cities, Brown said New Orleans is showing the greatest strides in occupancy rate, while San Francisco is leading the pack in growing rate, up 12.2 percent.

In context, Brown said that supply growth is muted; there is record-breaking demand; rate is catching up and is the driver of RevPAR.

Policy effect
PKF's Woodworth forcast how government policies might affect the hotel industry. He said a falling-off-the-cliff scenario (i.e. another recession), would still only result in a flat year for the hotel industry. His forecast is for the Fed to continue an easy monetary policy amid still-unsettled markets. "Consumer spending correlates higher to demand than GDP," he said. 

PKF is forecasting a 6.3-percent increase in RevPAR over the next five years. "2014 and beyond looks good," Woodworth said. 

Chris Klauda, VP, lodging servcies, D.K. Shifflet & Associates, said that leisure travel is driving growth in the hotel industry, not business travel. She also said that it's personal leisure—special events, etc.—and not vacations that are driving real growth. "Travel hassles have made electronic business communication more desirable," she said. "It's making for less business travel."

Topic : IHMRS, Industry Forecast
External Source : Hotel Management

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