Hotel industry set to see a sloth RevPAR in the next two years

Published on : Thursday, March 6, 2014

STRSTR and Tourism Economics predict revenue-per-available-room growth will continue to slow during the next two years, according to a new analysis of long-run lodging trends in relationship to the state of the economic cycle.


The STR/Tourism Economics forecast model indicates that RevPAR growth will slow to 5.3 percent in 2014 and 4.7 percent in 2015.


This outlook is an extension of the predictions made by the companies last year.


“Our forecasts for 2013 were more conservative than many analysts expected,” said Jan Freitag, senior VP of strategic development at STR.


“But we remained convinced that a shift to more moderate, post-recovery performance was under way.”

STR/Tourism Economics forecasted RevPAR growth of 5.8 percent for 2013 compared to actual growth of 5.5 percent based on updated year-end figures released by STR this month.


Demand expectations of 2.1 percent growth for the year compared favorably with an actual gain of 2.3 percent.


Both indicators reflect a step down in the pace of increases from each of the previous two years.


Moving forward, the forecasting partnership expects further slowing as both demand and average daily rate converge with non-recessionary period growth averages.


“While the U.S. economy is gathering force, the lodging sector is on the back end of its recovery cycle,” said Adam Sacks, president of Tourism Economics.


“We expect RevPAR to continue to grow but not at the rates seen over the past four years.”


While Oxford Economics, the parent company of Tourism Economics, expects U.S. gross domestic product to accelerate to 3.0 percent this year, the demand for lodging is forecast to grow 2.2 percent.


STR/Tourism Economics see this in the context of long-run relationships.

“Over the long term, lodging demand tends to expand more slowly than GDP. Since 1987, U.S. GDP growth has averaged 2.6 percent a year compared with lodging demand growth of 1.9 percent,” said Aran Ryan, director of lodging analytics at Tourism Economics.


The forecasters also note that room nights per capita (based on working age population) and per employee reached historic highs in 2013, indicating that the surge in demand associated with the recovery has peaked and a more tempered expansion lies ahead.

Source: STR and Tourism Economics.

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