Hotel Industry Expecting Robust Growth in 2011 and 2012

In news that any hotel operator would be thrilled to hear, PricewaterhouseCoopers just released its updated growth forecast for the hospitality industry, indicating that a rebounding national economy and a shortage in new lodging units will boost hospitality industry revenue per available room, also known a RevPAR, by a whopping 7.6 percent this year!

Given the weak economy in the United States over the past couple of years, caused by a mortgage bubble that sank the country into a protracted recession, the tourist industry has struggled to maintain adequate demand as people have less discretionary income to afford vacations. This has made it tough for any hotel operator to maintain their profit margins in the face of decreasing growth prospects.

The recession also made it difficult for hospitality management companies that depend on a healthy hotel industry in order to fuel their own growth. As occupancy rates and average daily prices fall, hotels have had less need for hospitality management companies to provide the necessary logistical support required to operate a hotel.

However, the latest forecast for the gross domestic product of the United States points to an economy that is expected to rebound later in 2011. In the first quarter of 2011, gross domestic product only grew at a 1.8 percent annualized rate, depressed by reduced government spending and inhospitable weather in many parts of the country. These conditions are expected to abate over the coming months, according to Macroeconomic Advisers, leading to a robust 3.2 percent increase in economic growth for the full year.

This increase in revenues will be magnified by a lack of new supply entering the market. This is due to a lack of construction, as businesses continue to have a difficult time securing credit. In 2010, new hotel construction reached its lowest level in nearly 20 years, and this trend is only expected to continue in 2011. Total new lodging supply is estimated to increase by 0.7 percent this year, only a third of its long-term historical average.

This points to a turnaround in both occupancy rates and the average daily price of a hotel room. In fact, hotel occupancy rates are expected to reach nearly 60 percent in 2011, while average daily rates will see solid gains of 3.7 percent. These gains will continue into 2012 when average daily rates are expected to increase by an even more impressive 5.5 percent. This will lead to a hefty 7 percent increase in RevPAR in 2012.

This is welcome news for every hotel operator and hospitality management company in the lodging industry. With these latest numbers, the hotel industry can look forward to not only increasing profits for the foreseeable future, but to a burgeoning hospitality industry that welcomes and spoils its clients and customers. This new period of growth also ushers in an opportunity for hotel operators to replace outdated infrastructure with energy efficient sources of power for a sustainable world where moderate investment now translates into savings later.