U.S. hotel occupancy and daily room rates will continue to rise but at a slower rate than previously expected, according to the latest forecasts from PricewaterhouseCoopers and STR.
In Hospitality Directions, consultancy PwC points out that average daily rate growth in the first quarter this year was the lowest since the fourth quarter of 2013. While demand growth remains strong -- driven in part by group travel -- it will be tempered by new supply, which will lower the rate of occupancy growth. PwC predicts that next year, supply growth will accelerate above the long-term average for the first time since 2009.
In its forecast, PwC calls for occupancy to remain flat this year, at 65.5 percent, and drop a bit in 2017, to 65 percent. Average daily rate will continue to rise, according to the forecast, by 4.7 percent this year and another 4.5 percent in 2017. The rise in revenue per available room will be much more moderate than in recent years, growing by 4.6 percent in 2016 and 3.7 percent next year.
For the upcoming summer months specifically, according to lodging data provider STR, room demand is forecast to increase by 2.1 percent over what has already been record-breaking levels. But a 1.7 percent growth in supply will keep the occupancy nearly flat, growing by 0.4 percent year-over-year. Average daily rate isn't expected to grow as much as it did last year.
"Average daily rate growth, while still positive, is certainly not as strong as we first expected," said Jan Freitag, STR's senior vice president for lodging insights. "The ADR forecast for the summer currently stands at around 4 percent. We expect that muted macroeconomic growth will have a small, positive impact on employment and corporate profit numbers. With that growth should be the desire for the American public to travel and for managers to send their people on the road."
STR will release its revised 2016/2017 forecast on June 6 at the NYU International Hospitality Industry Investment Conference.