PwC Predicts M&A Increases For Hotel Industry

Robust profits and strong consumer demand in the hotel industry will increase mergers and acquisitions in 2006, according to a forecast released today by PricewaterhouseCoopers.

PwC expects seven to 12 new lodging mergers and acquisitions, up from the five to 11 it predicted last year. Nine such transactions actually went forward in 2005. "The forecast is based on the strength of the equity markets," said Bjorn Hanson, head of PwC's hospitality and leisure practice, in a statement. "The low delinquency rates experienced in the challenging years of 2002 and 2003, compared with prior periods of low performance; favorable earnings before interest, taxes, depreciation and amortization; earnings per share multiples in public equities; and the flow of capital into equity markets contributed to the outlook."

Hanson tempered PwC's forecast with the notion that some suppliers may hold off selling in an attempt to gain a more favorable price down the road. Revenue per available room in 2006 is expected to increase 6.7 percent over 2005, according to Smith Travel Research.