As Current Cycle Matures, Hotel RevPAR Growth Decelerates According to PwC US; Supply Growth Moves Above Long-Term Average in 2017

NEW YORK,, May 24, 2016 /PRNewswire/ -- Occupancy levels at US hotels have begun to stabilize after reaching peak levels in 2015, according to Hospitality Directions, the lodging forecast released today by PwC US. Coming off the heels of a lackluster performance for the US lodging sector in Q4 2015, average daily rate ("ADR") growth in the first quarter was the lowest since Q4 2013. While overall demand conditions in the US are expected to remain positive, driven, in part, by firming group travel, increasing supply growth is expected to contribute to stabilizing occupancy levels. Average daily rates are expected to continue to increase, but at a slower pace than previously expected, impacted, in part, by lower growth in the overall economy. The estimates from PwC are based on a quarterly econometric analysis of the lodging sector, using an updated forecast released by Oxford Economics in May and historical statistics supplied by STR and other data providers.

For 2017, PwC expects demand growth to slow, just as the pace of supply growth accelerates above the long-term average for the first time since 2009. As a result, PwC's outlook anticipates occupancy levels to decline, but still remain near peak levels. Average daily rates are expected to continue to grow, although at a decelerating pace, driving a more modest RevPAR increase of 3.7 percent.

Oxford Economics expects real GDP to increase approximately 1.9 percent in 2016, measured on a fourth-quarter-over-fourth-quarter basis, driven by a number of factors, including solid labor market gains, stronger consumer spending, accelerating housing activity, and low inflation rates, partially offset by constraints on business investment.

"Despite a weaker than expected first quarter, overall demand for hotels in the US is expected to remain strong," said Scott D. Berman, principal and U.S. industry leader, hospitality & leisure, PwC. "And with economic growth anticipated for the remainder of the year, we expect room rates to reset to local market conditions." 

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SOURCE PwC US