Deteriorating Conditions Prompt PKF To Revise Hotel Occupancy, Revenue Forecast
Lodging research firm PKF Hospitality Research today announced a revised 2009 forecast showing sharp revenue drops and the lowest occupancy level in 20 years for the U.S. hospitality industry.
"Our outlook for the U.S. lodging industry has deteriorated dramatically in a fairly short period of time," PKF-HR president Mark Woodworth said in a statement. "We were pessimistic this past summer when we forecast a 3 percent decline in profits. Our view now appears optimistic as we consider the revised economic environment being painted for the remainder of 2008 and into 2009."
PKF now expects revenue per available room to drop by 4.3 percent in the United States and for U.S. hoteliers' profit to decline by 7.9 percent in 2009. At the root of those predictions is an expected 1.5 percent decline in U.S. lodging demand in 2009 as supply increases by 3 percent.
U.S. hotel occupancy will drop by 4.4 percent to a level of 58.3 percent, the lowest in the past 20 years, according to Woodworth. This will cut hotels' ability to negotiate price increases and diminish profit margins, he said. As a result, hotel rates are expected to increase an average of only 0.1 percent next year.
All of the 50 largest U.S. lodging markets should see some degree of decline in RevPAR next year, according to Woodworth. New York is forecast to see a 6.9 percent drop in demand but still maintain a well above-average occupancy rate of 77.3 percent. Other major cities will see occupancy levels plummet, including Atlanta, Chicago, Dallas, Orlando and Washington, D.C., according to PKF.
Financing difficulties have largely stopped the construction of new hotels, so supply growth should constrict in 2009 and 2010, which could in turn propel occupancy upward, according to PKF. "Given all the lodging industry will have to deal with in 2009, it is hard to look beyond a 12-month window," according to Woodworth. "However, a glance at 2010 does reveal the beginning of an upward trend."