Full-Service Hotels Lead the Way In U.S. Hotel Profits for 2004
Hospitality Research Group
|Atlanta. March 29, 2004. After three consecutive
years of declining income, the average U.S. hotel will improve its profitability
by 5.6 percent in 2004, according to the 2004 P&L Forecast published
by the Hospitality Research Group of PKF Consulting (HRG).
The forecast is based on a recently completed report prepared by HRG from its Trends in the Hotel Industry database, according to Mark Woodworth, Executive Managing Director of Atlanta-based HRG. The analysis considered all hotel property types throughout the nation and incorporates the recently released results of the HRG/TWR Spring 2004 Hotel Outlook forecast.
The main driver of this increase in profits is the projected 2.4 percent increase in average daily room rate (ADR) that supplements the estimated 1.9 percent increase in occupancy for the year. Like the increase in profits, this growth in ADR will also be the first increase for hotel room rates in three years.
“However, the picture is rosier for full-service hotels than for limited-service properties,” Woodworth said.
“Despite similar forecasts of revenue growth, we’re forecasting an 8.2 percent increase in full-service profits, compared to a 4.9 percent growth rate for limited-service profits,” he said.
The composition of the growth in RevPAR (Revenue per Available Room) is the main factor influencing the ability of managers controlling these two property types to deliver more dollars to the bottom-line, Woodworth explained.
For the full-service hotels in the survey sample, RevPAR is projected to grow 5.0 percent, aided by a 2.0 percent increase in ADR. Limited-service RevPAR is forecast to increase 4.6 percent, but benefiting from only a 0.8 percent improvement in ADR. Hotel profits exhibit the greatest gains when RevPAR growth is driven by ADR growth.
“The relative outlook for full- versus limited-service hotel ADRs reflects where the property types lie on their respective business cycles,” he explained.
The HRG study shows full-service hotels enjoying a slight (0.9 percent) increase in occupancy in 2003. On the other hand, limited-service hotels continued to suffer with a 0.9 percent decline in occupancy.
Following historical patterns, ADR growth lags behind occupancy increases during the early stages of market recovery. For full-service hotels, 2004 marks the second year of occupancy gains, thus allowing them to increase room rates to some degree. Conversely, limited-service hotels will experience only their first year of increased occupancy in 2004, therefore limiting their ability to raise rates.
HRG’s 2004 P&L Forecast provides estimates of all major revenue sources and departmental expenses for hotels. The Forecast contains projections for resort, convention, and all-suite hotels, as well as full- and limited service properties. Copies may be purchased through the firm’s website at www.pkfonline.com, or by calling Claude Vargo at (404) 842-1150, ext. 237.
The Hospitality Research Group (HRG), headquartered in Atlanta, is the research affiliate of PKF Consulting, the international consulting and real estate firm specializing in the hospitality industry. PKF Consulting has offices in New York, Boston, Philadelphia, Washington DC, Atlanta, Houston, Dallas, Los Angeles, and San Francisco.
Executive Managing Director
The Hospitality Research Group
3340 Peachtree Road, Suite 580
Atlanta, GA 30326
(404) 842-1150 x222
|Also See:||Demand in the Full-service Hotel Sector is Expected to Increase by 6.3% in 2004; Best and Worst Hotel Markets in Terms of RevPAR Growth / PKF Consulting / January 2004|
|Recovery for the Long-beleagured U.S. Hotel Industry; Top Ten Markets for Full-service Hotels, in Terms of RevPAR Growth / December 2003|