PKF: Hospitality Boom Should Last Into 2017

U.S. hotel occupancy should remain at record levels into 2017, predicted PKF Hospitality Research, Atlanta. 

PKF-HR forecast growth in lodging demand will exceed supply growth during each of the next two years, resulting in a national occupancy rate in the healthy 66 percent range.

“The fundamental characteristics of the economy remain relatively unchanged, as the labor market continues to improve and GDP growth remains steady if moderate,” said R. Mark Woodworth, senior managing director of PKF-HR.  “Accordingly, our forecasts for demand and average daily rate growth remain above the long-run average in both 2016 and 2017.”

Cornell University School of Hotel Administration Professor of Real Estate Jack Corgel said that because of rising room rates and record occupancy levels, many hotel developers get good financing terms and more projects either are beginning construction or reaching the final planning phase in the development pipeline. “Fortunately, demand continues to outpace supply throughout most of the country, and the new construction is not yet a cause for alarm,” he said.

STR, Hendersonville, Tenn., reported 132,000 rooms currently under construction nationally, up from 129,000 rooms during the second quarter. More than two-thirds of these properties lie in the upscale or upper-midscale chain categories such as Hampton Inn & Suites, Courtyard, Fairfield Inn and Hilton Garden Inn.

Fitch Ratings, New York, gave the global hotel industry its “stable” rating, but said it expects that global revenue per available room growth will modestly decelerate to 3-5 percent. Stephen Boyd, director of lodging and real estate investment trusts with Fitch, said the sector’s largest risks include geopolitical events that reduce travel demand, corporate mergers and acquisitions and an unanticipated industry downturn that would have severe RevPAR declines. Rapid growth in online alternative accommodation websites such as Airbnb also warrants closer scrutiny, he noted.

“We are not blind to current events and realize that non-economic risks do exist given the current international security environment,” Woodworth said. “However, these are events which we are unable to forecast. Based on what we do know and feel comfortable forecasting, the probability of an economic downturn in U.S. hotel industry performance remains remote.”