PwC Forecasts Continued Hotel Seller's Market

Hotel revenue per available room and average daily rate growth will flatten in 2008, but travel buyers should expect at least another few years of a hotel seller's market, according to PricewaterhouseCooper's 2007 U.S. Lodging Industry Report and Forecast released today.

The forecast, which has a historical accuracy record of a few tenths of a percentage point, indicated that average daily rates would increase by 5.6 percent in 2008, about the same level of growth forecast through the end of this year. Revenue per available room was forecast to increase 5.1 percent, well below the high levels seen in 2004 through 2006 but on par with the increase expected for this year.

PwC expects that occupancy will drop only slightly to 62.9 percent in 2008, compared 63.2 percent forecast for this year in total. It's still a high level of occupancy, particularly in high-demand cities, said Bjorn Hanson, PwC's hospitality and leisure group principal.

"2008 is within a few tenths of an occupancy point of the highest occupancies in 10 years," Hanson said. "So, right now pricing power in cities like New York, San Francisco and Boston are really driving these sets of numbers."

Although average daily rate in 2007 already is forecast to be driving more than 100 percent of RevPAR growth in 2007, and that share will increase even further in 2008, it's still not to the level of other years prior to a turnaround in the industry cycle. That would indicate a few more years favorable to hoteliers on the horizon, Hanson said.

On the supply side, the growth rate is expected to increases to 2 percent in 2008, compared with 1.3 percent in 2007 and three previous years of negligible change in supply, according to PwC. "We certainly have more openings and new construction in the pipeline than we did before, but we're not at the long-term level of supply growth," Hanson said.