NEW YORK CITY-The US lodging industry is continuing to recover from the post-9/11 downturn, with numbers returning to or topping year 2000 levels in many statistical categories, according to PricewaterhouseCoopers LLP's annual lodging industry report and forecast. When the year is done, RevPar growth in 2005 will be the highest since 1984, said Bjorn Hanson, global hospitality and leisure industry leader, at PwC's annual US lodging industry briefing this morning.
"After a couple of really disappointing years of occupancy below 60%, we are once again ahead of the 25-year occupancy trend," Hanson said. While there are many encouraging signs, not everything is as rosy as it seems, He warned, listing the aftermath of Hurricane Katrina and rising energy and land costs among the obstacles the lodging industry will have to surmount over the next year.
"It took four years to get back to 2000 levels, but if you take out inflation, we're still not there," Hanson said. "We've seen three years of expansion but room start gains are still flat." Room starts made up 2.1% of the existing hotel room supply this year. PwC researchers predict that occupancy will drop to 64.1 in 2006 but then rebound to 64.8% in 2007. PwC forecasts are typically on the money. Its researchers predicted the year-to-date occupancy of 64.7% to the exact decimal at last year's annual forecast and were off by a single percentage point in their forecast for 2004.
After dropping off sharply post 9/11, international travelers are once again returning to US shores in greater numbers, and hoteliers are finding more creative ways to generate revenue streams, such as new surcharge types and a reduction in the number of employees per occupied room. "The industry has had to buy a lot of this demand by discounting, (but) the luxury sector has really benefited because of discounts," Hanson said.
Positive signs are also coming in the form of Generation X, loosely defined as American adults between 25 and 40. "All my life I was told Baby Boomers would retire in their '50s with all this money to burn but that has not proven to be the case, it's the generation right behind us. Gen Xers don't stay as many nights as Baby Boomers do but they spend more per trip even though they earn $15,000 a year less. They are more interested in brands, which has lots of implications for design, marketing and advertising."
Despite the consolidation of ownership, 15 mostly luxury brands were added to the market in 2005, the most in any year since 1989. And the vacation ownership sector continues to demonstrate significant growth, introducing a record 18,600 new units this year. While an exact number was not projected by PwC, the sector was expected to top last year's record of $7.86 billion in sales, said Scott Berman, US hospitality and leisure advisory leader.
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