PKF Forecasts Overall U.S. RevPAR Drops, Cities Likely To Lead Recovery

The overall timeline for recovery in the U.S. lodging industry is lengthening, but certain markets should emerge more quickly than others and could be more challenging in negotiations for buyers in upcoming seasons, according to data released today by PKF Hospitality Research in its Hotel Horizons report.

PKF now is forecasting a 13.7 percent decline in revenue per available room this year, up from its early prediction of a 9.8 percent decline. The forecast said occupancy would drop by 7.8 percent and average daily rate by 6.4 percent, the steepest plummet since PKF began compiling data in 1932, according to PKF Hospitality Research president Mark Woodworth.

"Our national forecast encompasses the aggregate performance of thousands of hotels located all across the country," Woodworth said in a statement. "At that level, the outlook for the U.S. lodging industry is grim. However, when analyzing the data for each of the 50 individual markets that comprise our Hotel Horizons universe, it is clear that lodging behavior can vary considerably from market to market."

Two markets, Minneapolis and Orange County, Calif., seem poised to begin seeing RevPAR gains as early as the end of this year. Both Baltimore and San Antonio, Texas, are forecast to be the only two markets in the country to see demand increase this year, but that will be stifled in both cases by much higher than average increases in supply for the year, according to Woodworth.

PKF forecasts that 12 cities in 2010 will join Minneapolis and Anaheim in seeing RevPAR increases: Atlanta; Austin, Texas; Detroit; Oahu, Hawaii; Fort Worth, Texas; Raleigh, N.C.; Chicago; Dallas; Nashville; Columbus, Ohio; Albuquerque, N.M.; and Houston. Still, occupancy levels will be below average in all cities except for Houston, according to Woodworth.

All 50 markets will see recovery by 2011 and will see rate, occupancy and RevPAR growth through at least 2013, PKF data indicated. However, most will not have recovered to 2008 levels. Only six—Austin, Oahu, Minneapolis, San Francisco, Houston and Chicago—are forecast to see RevPAR surpass 2008 levels by 2011.

The Texas cities, also including Dallas, Fort Worth and San Antonio, will see the highest demand growth in that period, though San Antonio also is expected to see a whopping 24.1 percent increase in supply, the largest in the nation. About half of the 50 markets covered by PKF will not see demand get back to 2008 levels even in 2011, with the biggest drops forecast for Detroit, Tampa, Los Angeles and Oakland, Calif.