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US Hotel Industry

PKF: US hotel industry will have to wait till 2011

Jun 16, 2009

There is good news and bad news today for the nation's hoteliers.

"The good news is that the bottom of the current cycle for the U.S. hotel industry is soon to arrive," says R. Mark Woodworth, president of Atlanta-based PKF Hospitality Research.

"The bad news is that 2009 will be the weakest year on record for the domestic lodging industry, and 2010 is going to be disappointing as well."

Woodworth says, "Accordingly, industry participants need to calibrate their expectations when analyzing lodging performance measurements.

"If you are wondering when we'll start to see actual growth in room rates and revenues, then you'll have to wait until 2011.

"However, if you want to know when the operating environment is going to get a little less painful, that's happening right now."

PKF research shows revenue per available room (RevPAR) will reach its cyclical low point in the third quarter of 2009.

"This will bring to a close the escalating trend of declines in RevPAR that began in the third quarter of 2008," according to Smith Travel Research (STR).

In May 2009, Moody's downgraded its outlook of a 2.9 percent national employment decline to 3.8 percent, causing PKF-HR to revise its RevPAR forecast for the year.

"Given the correlation between employment and lodging demand, the new expectation is for RevPAR to decline 17.5 percent in 2009, followed by another 3.5 percent decline in 2010," says Woodworth.

He says, "While many markets are experiencing the lingering effects of new supply openings, the light at the end of the lodging demand tunnel has now appeared.

"According to STR, hotel demand first began to contract in the first quarter of 2008," notes Woodworth. "We expect this to persist through the end of this year; thus, we are now more than half way home towards a demand turnaround."

"We have identified the turning points and inflection points on the current business cycle. Knowing these milestones allows hotel owners and operators to properly prepare their operating and capital budgets, as well as investment strategies, for the remainder of 2009 and the years to come," says Woodworth.

"Given where we are at in the cycle, turning points denote the bottoming out of a measure, while inflection points mark when the important indicators exhibit positive growth.

"Accordingly, all the major lodging statistics turn in 2009, but won't begin to exhibit true growth until 2010 or 2011."

PKF: US hotel industry will have to wait till 2011
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