US hotel industry recovery will be driven by luxury hotels

The economic recovery has started in the U.S. hotel industry, driven mostly by demand for luxury hotels, suggests Smith Travel Research, which released its monthly forecast update last week.

The economic recovery has started in the U.S. hotel industry, driven mostly by demand for luxury hotels, suggests Smith Travel Research, which released its monthly forecast update last week.

“The luxury chains are going to be by far the best performing of the chain scales in 2010 in terms of RevPAR growthโ€”but of course they had the farthest to come,” said STR President Mark Lomanno. “It’s definitely going to be a luxury/upper upscale-led recovery, which is a textbook recovery. That’s important for the industry to regain pricing power across the board.”

According to STR’s latest forecast, the hotel industry is projected to end 2010 with increases in two of three key performance measures: occupancy, which is projected to increase 3.6 percent to 56.7 percent, and revenue per available room, which is projected to increase 3 percent to $55.13. STR’s third key metric, average daily rate, is expected to end the year virtually flat, with a 0.6 percent decrease to $97.26.

Supply, meanwhile, is expected to grow 2 percent during 2010, and demand 5.7 percent.

“Demand is improving; ADR is not,” Lomanno said. “That means there is an extremely fragile recovery. With occupancy being the driver, that’s the most tenuous of recoveries to have.”

While the picture for 2010 remains tenuous, the picture for 2011 is stronger, according to STR, which forecasts an increase in all three key metrics for next year. Occupancy will rise 2.5 percent to 58.1 percent, it predicts, while ADR will be up 3.9 percent to $101.05. RevPAR, it expects, will rise 6.5 percent to $58.70.

Finally, supply will increase 0.6 percent in 2011 and demand 3.1 percent.

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Linda Hohnholz

Editor in chief for eTurboNews based in the eTN HQ.

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