Skift Take

Expect room rates to rise in the U.S. in 2015, and that is likely to spur demand for midscale and economy chains.

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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Tags: occupancy, rates

Photo credit: Demand is robust this summer in U.S. hotels, and occupancy rates in 2015 are forecast to be the highest in two decades, according to PwC. Pictured, patrons enjoy a night spot at an Aloft property. Aloft Hotels

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