In 2016, Average Daily Rate Reluctantly Takes the Driver’s Seat According to Updated Lodging Forecast
February 4, 2016 8:23am
NEW YORK, February 4, 2016 – An updated lodging forecast released today by PwC US expects revenue per available room (“RevPAR”) growth in 2016 to continue, increasing by 5.5 percent, despite signs of potential economic concerns. Performance of the US lodging sector during the fourth quarter of 2015 was lackluster, with hotels struggling to meaningfully increase average daily rates (“ADR”), even as occupancy levels continued to increase, albeit at a slower pace.
The overarching question related to the lack of ADR growth, despite peak occupancy levels, raises concern in the industry. However, underlying corporate and leisure travel demand trends remain favorable, contributing to still increasing occupancy rates, which are at the highest level since 1981.
The estimates from PwC are based on a quarterly econometric analysis of the lodging sector, using an updated forecast released by Macroeconomic Advisers, LLC in January, and historical statistics supplied by STR and other data providers. Macroeconomic Advisers expects real gross domestic product ("GDP") to increase 2.4 percent in 2016, measured on a fourth-quarter-over-fourth-quarter basis, approximately 10 basis points lower than in PwC’s November lodging industry outlook. Macroeconomic Advisers’ reduction in GDP growth is primarily driven by less economic momentum and less favorable financial conditions, including a strong US Dollar.
Based on this analysis and recent trends, PwC expects lodging demand to remain strong in 2016, driven by a number of factors including continued strong fundamentals of employment, wages, and wealth as well as improving group demand. The pace of growth in the supply of hotel rooms is expected to increase to 1.9 percent, reaching the long-term average. As a result, PwC’s outlook anticipates a marginal increase in occupancy levels to 65.7 percent; the highest since 1981. With occupancy levels at a 35-year high, increased confidence amongst hotel operators and brands is expected to result in more meaningful average daily rate increases, albeit offset by the continued strength of the US Dollar, resulting in RevPAR growth of 5.5 percent.
Source: PwC US, based on STR data
“Recent turmoil in the financial markets and the lower-than-expected economic growth in the fourth quarter have raised some concerns,” said Scott D. Berman, principal and U.S. industry leader, hospitality & leisure, PwC. “However, industry fundamentals are solid heading farther into 2016, including the pace of corporate group travel. We expect peak occupancy levels in select markets should give hotel operators the confidence to meaningfully increase average rates, although the strength of the US Dollar may have an impact, particularly on gateway markets.”
Tags: average daily rate,
At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 157 countries with more than 208,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com.
© 2016 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.
PwC: Global Economic Growth in 2018 on Track to Be Fastest Since 2011
PwC's Manahattan Lodging Index Q3 2017
PwC's Hospitality Directions Forecast
Africa's Hospitality Sector Withstands Economic Headwinds
Lodging Demand Increases Amidst Increased Consumer Confidence, According to PwC
The Five Megatrends That Will Impact the Middle East’s Travel and Tourism Industry: PwC Report
Post-Election Surge in Consumer and Business Sentiment Suggests Momentum for 2017, According to PwC
South Africa’s Hotel and Tourism Sector Set for Steady Growth as Visitor Numbers Continue to Grow
Hotel Loyalty - What’s Driving Customer Loyalty for Today’s Hotel Brands? A PwC Report
Average Daily Rate Growth Continues to Lag Expectations, Despite Peak Occupancy Levels, says PwC US
Room for Growth: European Cities Hotel Forecast for 2015 and 2016 by PwC
Hoteliers Improve Average Daily Rate Performance Despite Weakening Reservation Pace
Average Daily Rate Growth Expected to Drive US Lodging Performance in Remainder of 2015 and in 2016
Spa Industry Surpasses $15 Billion Mark
Hotel Occupancy Continues to Surprise in 2015 According to PwC US
PwC's 5th Edition of the 'Hospitality Outlook: 2015-2019': South Africa, Nigeria, Mauritius & Kenya
Further Growth Expected in Africa's Hospitality Sector in the Next 5 Years, According to PwC Report
U.S. Lodging Sector Performance Remains Favorable Despite Sluggish Economic Growth, Says PwC US
Please login or register to post a comment.