Hotel Rates Hit Highest Ever, According to STR

Both STR and PwC U.S., top hotel analysts, are forecasting continued rate growth for the next year. According to STR, U.S. hotels in 2014 achieved the highest average daily rate ever recorded by STR - $115.32, up 4.6 percent over 2013, and the company expects 2015 ADR to top that by an additional 5.2 percent over 2014. Occupancy levels grew by 3.6 percent in 2014, to 64.4 percent. Average daily rate for 2014 increased in all of the top U.S. 25 markets, with the largest increases in Nashville, where ADR increased by 12.8 percent, to $116.86, and San Francisco, which jumped by 10.9 percent, to $207.81. The markets recording the largest occupancy increases for 2014 were Atlanta, with an 8.1 percent increase to an average occupancy of 68.2 percent; and Denver, where occupancy increased by 6.5 percent to 75.4 percent. 

An updated forecast from PwC U.S. reports the strong U.S. lodging rate gains of 2014 should further accelerate this year, driving a substantial increase in revenue per available room. The forecast is calling for a hefty 6.2 percent rise in average daily rate in 2015, and that's on top of the 4.6 percent increase reported in 2014. That will lead to a 7.4 percent year-over-year growth in RevPAR. According to the forecast, the solid demand growth experienced in 2014 -- with the group pace exceeding that of individual travel -- and supply growth that's still below the long-term average will allow hoteliers to raise rates by a substantial amount. More than 80 percent of this year's RevPAR growth is expected to come from rate hikes, which would be the highest contribution of ADR to RevPAR growth in the current economic cycle, according to PwC. The forecast, which is based on an economic forecast from Macroeconomic Advisers LLC and historical data from STR and others, also predicts a 2.6 percent rise in demand and a 0.7 percent uptick in occupancy.

Last year "was a year of pleasant surprises for U.S. hotels on many fronts, including a meaningful recovery in group demand not seen since 2010," said Scott D. Berman, principal and U.S. industry leader, hospitality and leisure, PwC. "With a strong near-term economic outlook, solid business and leisure travel trends, and below average supply growth, owners and operators can expect to have significant pricing power yielding higher room rates in 2015."