Hotels in the U.S. are poised for significant gains in 2014, according to data released by PKF Hospitality Research (PKF-HR).
The firm is projecting that hotels will see a 7.7 increase in RevPAR in 2014 as well as a 15.4 percent boost in net operating income (NOI). Supply and demand is also expected to remain in check with demand growing 3.3 percent while supply is projected to increase just 1.0 percent. This means that the national occupancy level is expected to be at 63.8 percent, the highest annual occupancy rate since 1997.
“We expect the factors that have inhibited lodging performance during the first half of 2013 will dissipate as the year goes on,” said R. Mark Woodworth, president of PKF-HR. “By 2014, any uncertainty caused by fears of fiscal cliffs and sequestration should be alleviated, thus resulting in improved attitudes among hotel guests, owners and operators.”
Although ADR growth has been underwhelming in the past few years, PKF-HR is forecasting that the annual growth rates for 2014-2016 will range from 5.4 to 6.4 percent.
“With ADR driving RevPAR in the years to come, we forecast double-digit, unit-level NOI increases through 2015, a trend that started in 2011. We have not seen such a sustained period of profit improvement since the inflationary days of the 1970s,” Woodworth stated.
Of the 50 markets tracked in the Hotel Horizons report, 33 are forecast to achieve occupancy levels at or above their pre-recession peak levels; 39 markets are forecast to achieve ADR levels at or above their nominal pre-recession peak; and 20 markets are forecast to enjoy RevPAR growth greater than 7.0 percent.
“Overall, we remain bullish on the nation’s major lodging markets in 2014. All 50 of the cities we track are expected to enjoy an increase in revenue during the year, but the diversity of the composition of supply, demand, and pricing changes that will fuel the revenue growth is something worthy of further investigation by industry participants as they prepare their marketing plans and budgets for the upcoming year,” said Woodworth.