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Stat: Hotel Revenue to Grow 5.9 Percent in 2016

August 31, 2015

PwC US is forecasting that average daily rate (ADR) will drive revenue per available room (RevPAR) increases in a more meaningful way through the second half of 2015 and into 2016. Recent performance of the lodging industry has generally met industry expectations, and during the second quarter, ADR growth drove RevPAR increases to a larger degree than in recent quarters, PwC US said. 


PwC finds that lodging demand trends in the U.S. have been robust, with both transient and group travel occupancy levels increasing 1.4 percent and 1.5 percent, respectively, during the first half of the year, contributing to peak occupancy levels for U.S. hotels. PwC expects this positive momentum in demand to continue for the remainder of 2015, supporting a RevPAR increase of 6.9 percent in 2015. In 2016, PwC expects RevPAR to grow 5.9 percent, driven by ADR.

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 July, and historical statistics supplied by STR and other data providers. Macroeconomic Advisers expects real gross domestic product (GDP) to increase 2.0 percent in 2015, followed by a 2.9 percent increase in 2016, measured on a fourth-quarter-over-fourth-quarter basis.

Based on this analysis and recent demand trends, PwC expects industry occupancy in 2015 to reach levels not seen since 1981, driven by a combination of strong demand momentum and a still-controlled supply environment. As industry occupancy peaks, average daily rate growth is expected to become more meaningful, as the effects of the recent rise in the value of the U.S. dollar wane, giving operators more pricing power, especially in certain gateway markets.

In 2016, supply growth is expected to accelerate to 2.0 percent per this analysis, with the increase in available hotel rooms exceeding, albeit slightly, the long-term average of 1.9 percent for the first time since 2009. As a result, while occupancy levels are expected to begin to stabilize, these peak levels coupled with the absence of this year's slowdown from the U.S. dollar is expected to support an average daily rate-driven RevPAR increase of 5.9 percent.


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