Lodging Demand Picks Up As Economy Stabilizes
NEW YORK CITY—Underscoring a recent turnaround in its fortunes, the lodging sector saw lodging demand increase at the strongest quarterly rate in two years during the first three months of 2017 even amid weak GDP growth, PwC US said Monday. This in turn led to modest growth in both occupancy and ADR during the first quarter, while overall RevPAR increased 3.4%.
“Despite the ongoing post-election partisanship, the US economy currently appears to be on firmer footing, compared to the same period last year,” says Scott D. Berman, principal and US industry leader, hospitality & leisure at PwC. “Events such as the presidential inauguration and women’s march in January boosted demand for hotel rooms in the greater Washington, DC market.
“This, coupled with other anomalies, such as timing of Easter and Passover, contributed to a good start in 2017,” Berman continues. “The industry needs to keep its eye on the prize and make sure this momentum can be sustained” for the balanced of the year.
PwC says a shift in the supply-demand balance in 2018 is anticipated to result in the first annual decline in occupancy since 2009, although a minor decline at that. ADR growth of 2.2% is expected to drive a year-over-year increase in RevPAR of 2.0%, the slowest growth rate in nine years.
The updated estimates from PwC are based on a quarterly econometric analysis of the US lodging sector. It utilizes an updated forecast released by IHS Markit and historical statistics supplied by STR and other data providers.
Based on IHS Markit’s economic forecast, PwC anticipates the Trump administration will attempt a more modest agenda in 2017 than initially suggested. This may impact previous expectations for significant tax and regulatory reform this year.
“Reinforced by rising employment, higher real income, and increased household net worth, consumer confidence and sentiment remain elevated,” according to PwC. ”For the remainder of 2017, US lodging performance is projected to temper, as peaking supply growth is expected to place increased pressure on pricing power.”