Hotels Prepare for Highest Occupancy Levels in 20 Years
Skift Take
A nightmare year of 2009, when U.S. hoteliers saw room rates and revenue plummet, now may seem like a vague, unpleasant memory as hotel occupancy in the U.S. in 2015 is forecast to reach 64.8% — the highest in 20 years.
Using data from Macroeconomic Advisors and Smith Travel Research, PwC US updated its 2014 forecast to detail higher than expected occupancy growth, and although it projects that occupancy growth would decelerate in 2015 because of an uptick in supply growth (1.6%), PwC foresees occupancy in the U.S. hitting 64.8% in 2015, the highest rate since 1995.
See the chart below for historical data on occupancy, average daily rates and revenue per available room.
Average daily rates are projected to increase 5.7% in 2015, the highest increase since 2007, the year the recession kicked in, as group travel supplemented increased demand from leisure and business travelers, PwC states.
RevPar would grow 6.9% in 2015, and that would be a slightly slower growth rate than the 7.6% RevPar increase forecast for 2014, according to the PwC analysis.
What does it all mean?
The demand environment slated for 2015 would provide hotels with “more confidence to push for higher room rates,” PwC states.
PwC projects that higher-priced chains will see more supply becoming available in 2015 than midscale and economy chains, and that will heighten demand for lower-priced properties.
In other words, the lower and midscale ends of the hotel industry, which have been hot, will likely get hotter.
“Occupancy levels in the lower-priced chain scale segments are expected to approach or exceed prior peak levels as price-driven compression from higher-priced hotels drives demand to lower-priced hotels,” PwC states.
Hotel Occupancy and Rate Growth 2004 to 2015 (Forecast)
| 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Occupancy | 61.30% | 63% | 63.25% | 62.80% | 59.80% | 54.60% | 57.50% | 59.90% | 61.30% | 62.20% | 64.10% | 64.80% |
| ADR Growth | 4.30% | 5.60% | 7.50% | 6.60% | 2.90% | -8.60% | 0.10% | 3.80% | 4.20% | 3.90% | 4.40% | 5.70% |
| RevPar Growth | 7.90% | 8.60% | 7.70% | 6.10% | -2% | -16.60% | 5.40% | 8.10% | 6.60% | 5.40% | 7.60% | 6.90% |
Source: PwC U.S., based on data from Smith Travel Research
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