Five-year U.S. RevPAR Forecast Signals 2011 Upturn

• 
  SAVE
• 
  SHARE
• 
  TEXT SIZE
• 
  PRINT
• 
  COMMENT
• 
  PDF

. September 20, 2009

SEPTEMBER 18, 2009 - RevPAR drop in 2009 marks most drastic at 17.4 percent; RevPAR decline to slow substantially in 2010 at 2.4 percent; return to robust positive growth in 2011

Jones Lang LaSalle Hotels today released its latest RevPAR forecast, a one-of-a-kind, five-year outlook indicating that revenue per available room (RevPAR) is expected to return to growth during 2011, which would represent the first year-over-year RevPAR increase since 2007.

"This year's hotel RevPAR decline in the United States likely will be the most drastic, projected at 17.4 percent. In 2010, RevPAR is projected to drop an additional 2.4 percent as demand remains soft and supply is expected to increase by 1.3 percent. The combination of soft demand and increased supply will cause hotel owners to continue to discount rates in an attempt to stimulate demand and build market share," said Arthur Adler, managing director and CEO-Americas for Jones Lang LaSalle Hotels.

RevPAR is expected to grow by 7.3 percent during 2011 which approximates the growth rate recorded in 2004 when the industry recovery accelerated. This growth rate is almost twice that previously forecast.

Stalled hotel development will continue to idle supply in 2011 and beyond - will be a key driver of RevPAR growth for that same time period. During 2008, approximately 145,000 new rooms entered the U.S. hotel market. U.S. supply is expected to increase by 2.6 percent during 2009, softening to 1.0 percent during 2010, and slowing further to 0.5 percent in 2011 as attrition rates for projects currently not yet in their final planning stage can be as high as 90 percent. The number of room cancellations and postponements during the second quarter of 2009 increased 59.1 percent over the same period in 2008.

"The signs of upward momentum in 2011 may help bridge the gap between next year's expected low point and a much-needed light at the end of the tunnel for struggling owners and operators," said Adler.

By 2013, U.S. RevPAR is forecast to reach $66.80, which would exceed the previous peak achieved in 2007 ($65.50). In 2013, U.S. Average Daily Rate (ADR) is expected to be 5.0 percent higher than the previous peak of 2008 ($106.60).

The firm's lodging performance forecast is based on an analysis of economic indicators which have demonstrated significant statistical correlation to hotel industry performance in the past including gross domestic product, gross metro product, S&P 500 Index, Consumer Price Index, U.S. retail and food services sales, U.S. personal income and U.S. wage and salary disbursements.

The firm also issued a five-year outlook for six major markets in the United States. "The metropolitan areas surveyed are all expected to experience a further RevPAR decline during 2010, ranging from an expected 5.6 percent drop in the New York metro area to a 0.8 percent softening in the greater San Francisco market," said Adler.

RevPAR in major U.S. markets is expected to post a return to growth during 2011 with Chicago and Washington, D.C. among the strongest of the cities studied, with expected growth rates of 5.7 percent and 4.6 percent, respectively.

"As the RevPAR recovery gathers steam in 2011, owners will need to maintain their focus the cost controls that have been implemented during this recession. Coupled with the expected increase in RevPAR in 2011, the ability to keep operating costs in check should contribute to strong profit growth for the industry," said Bruce Stemerman, managing director for Jones Lang LaSalle Hotels.

To request a copy of Jones Lang LaSalle Hotels' research report, FocusOn: Outlook for RevPAR Turnaround, visit www.joneslanglasallehotels.com or www.jllhss.com.