PKF Predicts Depth Of Hotel Revenue Drop

Hotels are likely in 2009 to see the fifth-worst decline in revenue per available room in the modern lodging industry's history and are unlikely to see RevPAR rise again until the second quarter of 2010, according to a PKF Hospitality Research forecast update released Tuesday.

PKF said it now expects RevPAR to drop by 7.8 percent in 2009. Since 1930, only four years have had sharper RevPAR decreases, including 2001, when RevPAR decreased by 10.3 percent. In addition, PKF projects that RevPAR will decline for seven consecutive quarters, beginning with Smith Travel Research's recently reported 1.1 percent decline for the third quarter of 2008. That would be the longest stretch of falling revenues since Smith Travel Research began tracking the data in the late 1980s, according to PKF.

The economic downturn's impact on the lodging industry will be magnified by the expected 2.9 percent increase in supply in 2009 compared with 2008, PKF reported. This will contribute to a 5.3 percent drop in occupancy.

"The combination of above-average net increases of supply occurring simultaneously with dramatic declines in demand is something we have not seen in recent industry recessions," PKF Hospitality Research president Mark Woodworth said in a statement. "This is what makes this downturn so severe."

In terms of average daily rate, PKF is forecasting a 2.7 percent decline in 2009. Though hotels were holding onto and even increasing rates through most of 2008, continual decreases in occupancy finally began to cut rates beginning in October, the firm reported.

Hoteliers also are sharing the bleak outlook for their industry in 2009. On Tuesday, Marriott CFO Arne Sorenson warned of a tough 2009 in a posting on CEO J.W. Marriott Jr.'s blog.

"We said last October that we expected RevPAR to be down at least 3 percent in North America next year," Sorenson said on the blog. "Just about a month ago, Bill Marriott reported that our business outlook had further weakened."

Wyndham Worldwide this week also announced that it was cutting about 4,000 jobs, 12 percent of the company's overall workforce, as it restructures its timeshare business. The company also announced that it cut its revenue projections for 2009.