PKF Reduces Hotel Growth Forecast

PKF Hospitality Research, in response to deteriorating economic conditions, today lowered its expectations for the lodging industry's growth in revenue per available room in 2008 to below-average levels.

After several years of a strong seller's market, PKF's revised forecast called for RevPAR growth of only 3 percent for the year, compared with the earlier forecast of 4.5 percent. PKF said the change was based on projections from its primary economic forecasting agency, Moody's Economy.com, that anticipate a recession this year.

Considering overall economic conditions, PKF Hospitality Research president Mark Woodworth said demand growth would increase only by 0.9 percent in 2008, about half of the long-term annual average. At the same time, there will be a modest increase in supply, contributing to an expected full-point decline in the national average occupancy rate this year, according to PKF.

In the long term, however, PKF said the lodging industry slowdown would be short-lived, particularly as supply growth slows in the years ahead. "When looking at 2008, we believe that U.S. hotel owners and operators will struggle to grow their revenues and profits, but market conditions will not be as damaging as we saw back in 1991 or 2001," Woodworth said in a prepared statement. "Forecasts of economic recovery, plus a slowdown in the pace of new supply, will lead to increasing occupancy levels beyond 2009."

The slowdown in RevPAR also won't mean a slowdown in rate growth, according to PKF, and its forecast for a 4.7 percent average daily rate increase in 2008 remains unchanged. That increase is above both the 2.7 percent projected inflation rate and the 3.5 percent long-term average increase in room rates.