PricewaterhouseCoopers Forecasts Gloomy Lodging Future

NEW YORK CITY-PricewaterhouseCoopers anticipates two and half years for revenue per available room recovery to reach favorable second quarter 2000 levels. RevPAR downturn should rebound third quarter 2002, and return the industry to its 1996 watermark of $29.25 by fourth quarter 2003.

Occupancy levels are forecasted to fall in 2002 to their lowest since 1971. Average daily rate, too, will feel the post-Sept .11 effects, dropping to 1940 levels. An above-inflation rebound is not expected until 2003, when upper demand growth, ADR, supply growth and upscale segments are all expected to upswing.

Not surprisingly, profit forecasts are down for 2002. Aggregate profits are predicted to decrease for the first time since 1991, and lodging productivity should see a drop as room demand declines outpace lodging employee layoffs.

The increased delinquency trend within the industry is also expected to continue. Standard & Poor’s reports a 41% increase in late payments on lodging loans for October, compared to pre-Sept. 11 levels. Most affected by the trend will be the midprice and economy sectors, which were already on a downturn prior to the attacks.

In Manhattan, occupancy levels for December 2001 are expected to average just 68% occupancy, the lowest since that month in 1992. Similarly, ADR and revenue levels will follow the decline.

According to the report, Boston, Orlando and San Francisco will be the hardest hit within top US markets, indicated by RevPAR, occupancy and ADR levels.

Perhaps a silver lining, Anaheim-Santa Ana, Philadelphia and Phoenix are reported as the most improved locations in recent months. Additionally, the report predicts upside potential in 2002 for Chicago, Dallas, Los Angeles, Los Angeles, Tampa and Washington, DC.