Finance & DevelopmentFinanceSurge in Consumer, Business Sentiment Suggests Momentum for 2017

Surge in Consumer, Business Sentiment Suggests Momentum for 2017

NEW YORK—The updated lodging forecast released today by PwC U.S. notes that strong industry performance in the fourth quarter of 2016, including encouraging trends in demand and average daily rate (ADR), coupled with a post-election surge in consumer and business sentiment that contributed to improving economic conditions, sets the stage for continued revenue per available room (RevPAR) growth in 2017.

PwC expects the increase in supply of hotel rooms to marginally outpace growth in demand, resulting in a decline in occupancy to 65.3 percent. Aided by an expected increase in corporate transient demand, growth in average daily rate is expected to drive a RevPAR increase of 2.3 percent, according to the report.

PwC’s outlook is based on an economic forecast from IHS Markit, which expects real GDP to increase 2.3 percent in 2017, measured on a fourth-quarter-over-fourth-quarter basis, approximately 50 basis points higher than in PwC’s November forecast. Improving economic conditions are driven by a number of factors, including improving business and consumer confidence, and surging financial markets, as well as potential policy decisions related to tax cuts and changes to trade regulations.

The updated estimates from PwC are based on a quarterly econometric analysis of the US lodging sector, using an updated forecast released by IHS Markit and historical statistics supplied by STR and other data providers.

“Based on a strong fourth quarter, we are encouraged by the trends we are seeing as we head into 2017,” said Scott D. Berman, principal and U.S. industry leader, hospitality & leisure, PwC. “However, we remain cautiously optimistic, as higher-than-previously anticipated increase in demand is still expected to be offset by increasing supply through the year.”