PKF Hospitality Research today published a report forecasting that rates will continue to fall until the end of 2010, but that the U.S. lodging industry declines would begin to decelerate in the third quarter of this year.
PKF expects rates to drop 10.2 percent for 2009 and by another 3.3 percent in 2010. The biggest discounting will happen this summer, when travel buyers traditionally negotiate the rates in their programs for the following year, said Mark Woodworth, president of PKF Hospitality Research.
Woodworth said in the report that 2009 would go down as the weakest year ever recorded for the U.S. lodging industry, and hoteliers should not expect to see a rebound in 2010. The decline escalations in revenue per available room, however, are nearing an end, he said.
"If you are wondering when we'll start to see actual growth in room rates and revenues, then you'll have to wait until 2011," Woodward said in a statement. "However, if you want to know when the operating environment is going to get a little less painful, that's happening right now."
For full-year 2009, PKF now said occupancy would decrease by 8.1 percent and revenue per available room by 17.5 percent, even higher than PKF predicted in its March forecast of 13.7 percent
(BTNonline, March 18). Those drops will continue in 2010, but at the much more moderate levels of occupancy down 0.2 percent and RevPAR down 3.5 percent.
"Best practices may state that discounting does not induce demand, and we know the negative impact that rate reductions have on the bottom line. However, we are simply in a time and place when the laws of supply and demand trump a more optimal practice," according to Woodworth. "Nine consecutive quarters of year-over-year reductions in room rates is great news for travelers but a major cause of concern for hotel owners and their lenders."