PKF: 2014 occupancy to be highest annual rate since 1997

(PKF: 2014 occupancy to be highest annual rate since 1997)

Hotels in the United States will experience significant gains in performance in 2014, according to the June 2013 issue of Hotel Horizons from PKF Hospitality Research. The group is projecting that U.S. hotels will see a 7.7-percent increase in revenue per available room in 2014, and a 15.4-percent increase in net operating income.

For 2014, PKF-HR is forecasting a 3.3 percent growth in lodging demand, along with a projected supply increase of 1 percent. The net result is a national occupancy level of 63.8 percent in 2014, the highest annual occupancy rate since 1997.

"Throughout the recovery, we have been pleasantly surprised by the surge in demand. That being said, the growth in average daily rates has been underwhelming," said R. Mark Woodworth, president of PKF-HR. "Starting in 2014, we foresee economic and market conditions that should allow managers to become more aggressive with their pricing policies."

From 2014 through 2016, PKF-HR is forecasting annual ADR growth rates ranging from 5.4 to 6.4 percent. As a result of the ADR growth projections, PKF-HR also is forecasting bottom-line gains.

"With ADR driving RevPAR in the years to come, we forecast double-digit, unit-level NOI increases through 2015, a trend that started in 2011," Woodworth said. "We have not seen such a sustained period of profit improvement since the inflationary days of the 1970s."

Here are some of the highlights of the report:

  • Supply growth is estimated to be 1 percent or less in 27 markets.
  • 33 markets are forecast to achieve occupancy levels at or above their pre-recession peak levels.
  • Two markets are projected to suffer a decline in demand, but five markets are forecast to experience a decline in occupancy.
  • 39 markets are forecast to achieve ADR levels at or above their nominal pre-recession peak.
  • 17 markets are projected to see ADR grow by 6 percent or more.
  • 20 markets are forecast to enjoy RevPAR growth greater than 7.0 percent.

As for individual markets, Oakland RevPAR will rise 10 percent next year, while Denver and Chicago RevPAR will increase 8.9 percent and 8.7 percent, respectively, according to PKF. Houston and Charlotte will both enjoy RevPAR increases of more than 8 percent.