by Michael J. Shapiro | April 01, 2015
R. Mark Woodworth, senior managing director, PKF Hospitality Research
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The U.S. lodging industry will enjoy significant growth in revenue per available room over the next two years, according to the March 2015 edition of Hotel Horizons from PKF Hospitality Research. While a mix of record-setting occupancy and rising rates has been responsible for the industry's success thus far, according to the report, in 2016 slowing occupancy growth will give way to the rapidly rising average daily rate as the main force pushing revenues up.  

The latest PKF-HR forecast calls for a 7.3 percent year-over-year increase in RevPAR for 2015, thanks to a 1.9 percent rise in occupancy and a 5.3 percent growth in average daily rate. In 2016, occupancy growth is expected to slow to just 0.6 percent, with the average daily rate skyrocketing by another 6.3 percent, driving RevPAR up by another 6.5 percent.

"The 65.6 percent occupancy level we are forecasting for 2015 is an all-time record for the 27 years STR has been reporting U.S. lodging industry performance," noted R. Mark Woodworth, senior managing director of PKF-HR. "At such lofty levels, it is natural that the pace of occupancy growth will slow down, and we will start to see prices take off," he added.

As new hotels open in the next few years, hoteliers will begin to see the effects on RevPAR, said Woodworth. This year, Austin, Texas; New York City, and Pittsburgh should see the largest supply increases, as well as the lowest RevPAR gains.

"Localized surges in supply are creating declines in occupancy, which in turn results in suppressed RevPAR growth," Woodworth explained. "Clearly this is going to occur in more and more cities over the next few years."

The national supply growth shouldn't exceed the long-run average until 2017, notes the report, which should allow for strong ADR growth until then.