Consumer spending, Economy

Lodging sector sees positive performance despite struggling economy

PricewaterhouseCoopersPricewaterhouseCoopers said on Tuesday that an upward swing in travel will contribute to increased revenue per available room—or RevPAR—this year, despite a struggling economy.

Occupancy levels at higher-priced hotels have topped previous peak levels, and industry RevPAR has also surpassed its prior peak. Hotel construction, while improving, remains moderate. As demand outstrips supply growth and the economy improves, PwC said it expects the average daily rate to continuously improve, resulting in RevPAR growth of 5.6 percent this year and 5.9 percent next year.

The updated outlook is based on a quarterly econometric analysis of the lodging and hospitality sector using a forecast released by Macroeconomic Advisers in August and historical statistics provided by Smith Travel Research and other data providers.

Based on the revised outlook, PwC said it expects lodging demand to increase by 2.2 percent this year, which, combined with lagging supply growth, will boost occupancy levels to 62.2 percent—the highest level since 2007.

Demand is primarily driven by the business and leisure travel segments, which have benefited from technology, healthcare and business sectors, all of which are essential to the lodging industry.

Recently released data suggests that consumer spending is on the rise, due in part to an increase in household wealth and lower debt. Business investment spending is also on the rise, and companies continue to plan group meetings and events.

Rising occupancy levels are expected to result in a solid 4.7 percent increase in ADR next year.

“While the pace of economic recovery remains an overhang on some segments, particularly group travel, we’re seeing business and leisure transient hotel demand remain robust, particularly in most of the U.S top 25 markets,” Scott D. Berman, the principal and U.S. industry leader of hospitality & leisure at PwC, said. “As U.S. hotels enter the budgeting and rate negotiation period this fall with their most significant corporate customers, the foundation is in place for room rate gains, in part due to a favorable supply-demand balance.”

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