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Hotel room rate gains are expected to accelerate in 2015 as the industry reaches its highest occupancy level since 1984, according to a new lodging forecast by PwC US.
Increased momentum of group demand growth during the third quarter of 2014 is expected to continue in the fourth quarter, and into 2015. Lodging operators are reporting solid momentum in group pace for 2015. The strong outlook for group demand, coupled with continued strong transient travel activity and a positive economic environment is expected to drive a solid 8.2 percent increase in RevPAR this year. In 2015, supply growth is expected to accelerate, resulting in moderating growth in occupancy. Still, industry-wide occupancy levels are expected to reach 64.9 percent, the highest since 1984, providing hotel operators with leverage to drive more aggressive pricing.
Based on this analysis and recent demand trends, PwC expects lodging demand in 2014 to increase 4.3 percent, which combined with still-restrained supply growth of 0.9 percent, is anticipated to boost occupancy levels to 64.2 percent. PwC's outlook expects accelerating supply growth of 1.4 percent in 2015, as construction of new hotels gathers momentum (up approximately 40 percent in the third quarter, compared to the same quarter last year). Occupancy levels in the lower-priced chain scale segments are expected to approach or exceed prior peak levels, as price-driven compression from higher-priced hotels drives demand to lower priced hotels.