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 PKF Hospitality Research Predicts Nine Consecutive Quarters of Declining
Lodging Demand Will End in the Second Quarter of 2010
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More Guests in 2010 - But with a Catch

 
ATLANTA, Ga., August 13, 2009 – PKF Hospitality Research (PKF-HR) today announced that, according to an advance release of the September 2009 edition of Hotel Horizons®, nine consecutive quarters of declining lodging demand will come to an end in the second quarter of 2010.
 
“With the budgeting process underway at hotels around the U.S., the recovery of lodging demand is an important milestone that will be reached in the year ahead,” said R. Mark Woodworth, president of PKF Hospitality Research. “The catch; however, is that the practice of price discounting has firmly taken hold, and, as a result, room rates are expected to decline once again in 2010.”  
 
Hotels that operate in the luxury, upscale, and midscale without Food & Beverage segments are expected to more customers beginning to re-appear in the fourth quarter of 2009.  “While the price paid for the room will remain the most important criteria for most travelers in 2010, the value received will once again factor into the buying decision” Woodworth noted. “Higher-priced hotels have suffered the greatest erosion in pricing power during this protracted contraction and, as a result, offer an abnormally strong value proposition as the industry begins to turn the corner mid-way through 2010.  We also believe that those property types that were the best performers before the recession are going to be those leading us out.”  The two chain scales lagging the U.S. demand recovery will be midscale with Food & Beverage and economy, which will not see improved performance until the third quarter of 2010. 
 
“Of the 50 markets monitored by PKF-HR, 45 will experience stronger demand in 2010 than in 2009,” Woodworth added. “It is important to note, however that supply increases are still an issue for hoteliers across the U.S., as 25 of our 50 markets will report further declines in occupancy, even with 20 of those 25 experiencing demand increases.”  The five lagging markets are Fort Lauderdale, Indianapolis, Miami, Tampa, and Washington, D.C.

Budgeting Accuracy – What We Learned In 2002 & 2003
 
“During the two budgeting seasons following the post-9/11 period, every forecast and prediction had the business environment improving in the ‘next’ quarter, regardless of whether that next quarter was the second quarter of 2002, third quarter of 2002, or the fourth quarter of 2003.  This optimism led to budget shortfalls, which continued until 2005,” Woodworth recounted. “Like times in our recent past, successful hotel owners and operators must be prepared to anticipate additional declines in certain metrics for 2010, which can be extremely difficult without guidance.  Hotel Horizons® can help by bringing some clarity to the future outlook.”
 
Hotel Horizons® is a series of econometrically derived forecast reports developed by PKF Hospitality Research.  The reports cover 50 of the largest U.S. hotel markets as well as the nation as a whole, and six chain scales.  Economic forecasts by Moody’s Economy.com and historic hotel performance data and future supply pipeline information from Smith Travel Research are used to construct the industry’s most comprehensive forecasts of U.S. lodging market behavior. 
 

Forecast Change in Key Metrics, 
U.S. Lodging Industry
Year  Occupancy  ADR  RevPAR  Supply Demand
2009 -9.0%  -10.4%  -18.5%  3.0%  -6.3%
2010 0.4%  -3.1%  -2.7%  1.2%  1.6%
Source: PKF Hospitality Research, September-November 2009 Edition of Hotel Horizons®

Introducing: myShareSM
 
Since it is budget season, owners and operators are thinking about how their hotel will perform in 2010.  Historically, the movement in a hotel’s occupancy and average daily rate from year to year can be largely explained by the movement of the overall market in which the property sits. “Our research over the past 10 years reveals that seventy-five to eighty percent of a hotel’s performance is systematically a function of changes in the larger market in which the property is located,” notes John B. (Jack) Corgel Ph.D., Senior Advisor to PKF Hospitality Research and the Robert C. Baker Professor of Real Estate, Cornell University School of Hotel Administration.  “And who is better at knowing that remaining twenty to twenty-five percent than the local property owner or operator?  The person in charge of the hotel knows when rooms will come in and out of service, when renovations occur, and when competitors open across the street.” 
 
PKF Hospitality Research is introducing a new tool called myShareSM which helps managers incorporate the current PKF-HR forecast for their market into an estimate of the future performance of any submarket, competitive set, or their hotel.  Included as a complimentary addition to all single market Hotel Horizons® reports, the myShareSM tool is an Excel-based application that comes pre-loaded with the respective Hotel Horizons® forecasts for all hotels, upper priced, and lower priced properties within a defined geographic market, as well as historic 
 
submarket data from which to assist the user in calibrating penetrations.  For more information, as well as a video demonstration of myShareSM, go to www.pkfmyshare.com 

To purchase Hotel Horizons® forecast reports for the United States, or one of 50 individual markets, please visit the firm’s online store at www.HotelHorizons.com, or call (866) 842-8754.
 
PKF Hospitality Research (PKF-HR), headquartered in Atlanta, is the research affiliate of PKF Consulting, a consulting and real estate firm specializing in the hospitality industry.  PKF Consulting has offices in Boston, New York, Philadelphia, Washington DC, Atlanta, Miami, Indianapolis, Houston, Dallas, Bozeman, Sacramento, Seattle, Los Angeles, and San Francisco.

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Contact:

Mark Woodworth 
President  
PKF Hospitality Research 
3475 Lenox Road, Suite 720 
Atlanta, GA  30326 
(404) 842-1150, ext 222 

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Also See: Hoteliers Underestimated 2007 Profits; Will They Lowball 2009? / Robert Mandelbaum and Steven Nicholas / October 2008
U.S. Lodging Turning Point Arrives But Growth Remains on Distant Horizon; New Expectation Is for RevPAR to Decline 17.5% in 2009, Followed by Another 3.5% Decline in 2010 / June 2009
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