"This is another turning point for the U.S. lodging industry," observes Bjorn Hanson, Ph.D., New York-based chairman of the Coopers Lybrand lodging and gaming group, creators of the Lodging Research Network (www.lodgingresearch.com).
Other Segments Lag
The U.S. upscale, midprice, economy and budget hotel segments will experience 1999 RevPAR growth that is less than the rate of inflation, according to the Lodging Research Network.
In the upscale hotel segment, RevPAR will rise from $62.02 in 1998 to $63.54 in 1999, a gain of 2.5 percent, according to the Lodging Research Network. In the midprice segment, RevPAR will rise from $45.63 in 1998 to $46.48 in 1999, a 1.9 percent gain, www.lodgingresearch.com says. At economy hotels overall, RevPAR will rise from $30.91 in 1998 to $31.43 in 1999, a 1.7 percent increase. And in the budget segment, RevPAR will rise from $26.12 in 1998 to $26.58 in 1999, a 1.8 percent increase.
"Behind slowing gains in RevPAR are two factors: declining occupancy rates from decelerating growth in demand and accelerating room supply growth," Hanson observes.
For the U.S. overall, occupancy will decline from 63.9 percent in 1998 to 62.9 percent in 1999, according to the Lodging Research Network. Demand growth will drop from 2.8 percent in 1998 to 2.0 percent in 1999, www.lodgingresearch.com says, while U.S. hotel room supply will grow by 3.5 percent in 1998 and 3.4 percent in 1999.
"Still, we expect lodging industry profits to increase 9.1 percent from $17.6 billion in 1998 to $19.2 billion in 1999," Hanson notes. "Fueling profits will be the strength of the luxury segment -- and the overall lodging industry's greater attention to maximizing margins, wringing out unnecessary costs from hotel operations," he adds.
Coopers Lybrand uses a proprietary econometric model to forecast U.S. lodging industry trends. Underlying macroeconomic assumptions are from the WEFA Group, the Philadelphia-based macroeconomic forecaster. The accuracy of Coopers Lybrand's econometric forecasts for the lodging industry is well established. In 1991, when the lodging industry was experiencing declining occupancy and financial losses, Coopers Lybrand forecast that 1993 would bring a return to profitability and average daily rate increases greater than inflation. Both predictions proved accurate. In the first quarter of 1996, Coopers Lybrand was the first consulting firm to forecast a coming downturn in hotel occupancy. The firm's occupancy "early warning" was issued in April of 1996. Coopers Lybrand's Lodging Research Network (www.lodgingresearch.com) makes available via the Internet Coopers Lybrand's renowned econometric forecasts for the lodging industry, breaking lodging industry news, an exclusive database of lodging industry real estate acquisitions, financial data of publicly traded lodging companies (including SEC filings), new hotel construction data, lodging census data from Smith Travel Research as well as an extensive research library that includes U.S. econometric and demographic statistics. For more information about the Lodging Research Network, call toll-free 888-576-6656. One of the world's leading professional services firms, Coopers Lybrand L.L.P. provides services for enterprises in a wide range of industries. The firm offers its clients the expertise of more than 19,000 professionals and staff located in 100 U.S. cities and, through the member firms of Coopers Lybrand International, more than 82,000 people in 138 countries worldwide.