PricewaterhouseCoopers' hospitality practice head, Bjorn Hanson, today at the 2006 Corporate Travel World conference in New York City predicted increased growth rates for hotels through 2008, spelling further negotiation complexities for corporate travel buyers.
Hanson said this trend meant higher room rates, less availibility and a lower priority on group travel by hotels.
"I think hotels are in the best condition they've been in since 2000," said Hanson. "The industry right now is stable and our forecast for 2006 is even better, which is bad for buyers." Hanson forecast that 2006 hotel profits would reach $25.6 billion.
Although occupancy rates, at 63.1 percent in 2005, remain below the long-term trend line, Hanson said, average daily room rates continue to rise. Hanson predicted a 5.8 percent year-over-year increase in ADR this year and a 7.7 percent increase in revenue per available room from last year's levels. He said the acceleration was due in part to increased business travel by Generation X.
The good news for hotels was tempered by a prediction from Hanson that sustained growth and profilitability would slow after 2007. "2008 will be the peak, then there may be weakening," he said. He predicted that RevPAR and ADR would dip in 2008, but occupancy rates would remain similar.
Hanson also said hotels' proprietary Web sites would continue to gain booking share.
Download Hanson's PowerPoint presentation to CTW attendees here.