PwC: RevPAR growth to decelerate this year

Photo credit: Pexels/Frans Van Heerden

Although the United States hotel industry’s outlook for this year remains stable due to a steady economy and increased consumer spending, PwC noted in its “PwC Hospitality Directions US: January 2019” updated outlook that revenue per available room is expected to increase in 2019 but at a slower pace. 

PwC forecasts that RevPAR will grow 2.3 percent this year. Last year, U.S. hotels grew RevPAR 2.9 percent. This year’s RevPAR growth will be driven exclusively by average daily rate, which is anticipated to grow 2.7 percent. Researchers noted that this is the first time since 2007 that room rates will drive all of the RevPAR growth. Occupancy, meanwhile, is predicted to fall to 65.9 percent this year.

U.S. Hotel Industry RevPAR Growth Over the Past Decade

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2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019(F)

-16.6%

+5.4%

+8.1%

+6.7%

+5.2%

+8.2%

+6.1%

+3.1%

+2.9%

+2.9%

+2.3%

Source: PwC; STR

Luxury hotels are forecast to clock the highest RevPAR growth at 3.3 percent, which is lower than 2018’s growth of 4.4 percent, according to the report, which also used STR data. Upper-upscale is the only chain scale whose RevPAR growth this year will surpass last year’s growth, growing 1.9 percent in 2019 versus 1.8 percent the previous year. Upscale hotels’ RevPAR growth will remain flat at 1.5 percent. Upper-midscale and midscale hotels will see the least growth in RevPAR this year, both increasing the metric 1.2 percent. However, the midscale segment is coming down from a much higher growth rate of 2.2 percent from last year, while upper-midscale hotels grew RevPAR 1.4 percent in 2018.

Increasing hotel supply still is top of mind for the industry. PwC researchers said supply will increase at a rate close to the long-term average, growing 2.1 percent in 2019. However, financing conditions are getting tighter, and labor and construction costs are growing. Those factors could cause a lag in supply growth.

U.S. Hotel Industry Supply Growth Over the Past Decade

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019(F)

+2.8%

+1.7%

+0.4%

+0.3%

+0.5%

+0.6%

+0.9%

+1.4%

+1.7%

+2%

+2.1%

Source: PwC; STR

Meanwhile, demand growth (+1.6 percent) is not expected to keep pace with supply growth this year, according to PwC’s outlook. By comparison, demand for U.S. hotels grew 2.5 percent last year.

And while researchers noted that the outlook looks stable now, they warned that the industry should be watchful for negative impact from the partial U.S. government shutdown, continued trade tensions, tariff issues, political uncertainty and rising interest rates.

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