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PKF Hospitality Research Updates Forecast to Show U.S. RevPAR Growth
of 1.7% in 2010 While Profits Will Contract 1.4%

ATLANTA, May 25, 2010 -- PKF Hospitality Research (PKF-HR) today announced that, according to the May 2010 edition of Hotel Horizons®, U.S. hotels should enjoy a 1.7 percent growth in RevPAR in 2010, but bottom-line profits (NOI) will contract another 1.4 percent.  The projection of growth in RevPAR for 2010 marks a very positive change in the outlook for the U.S. lodging industry since PKF-HR's last forecast published in March of 2010.

"We believe the first quarter surge in occupied rooms foretells the start of a strong comeback in the demand for lodging accommodations," said R. Mark Woodworth president of PKF-HR.  "As early as September of 2008, we anticipated the inflection point for hotel demand to occur in the first quarter of 2010, but quite frankly, the magnitude of the turnaround was a very pleasant surprise.  Such a large increase in lodging demand suggests a return of pent up travel that did not occur in 2009 because of budget constraints, plus the real hotel demand growth attributable to improvements in the long-term economic outlook."  According to Smith Travel Research (STR), lodging demand in the first quarter of 2010 increased 5.3 percent over the first quarter of 2009.  This is the largest quarterly increase in hotel demand since the second quarter of 1989, and surpassed PKF-HR's forecast of a 2.6 percent gain.

"Forecasting turning points in hotel market performance is a tricky proposition, largely because of the complications on the supply side of the hotel market," said John B. Corgel Ph.D., the Robert C. Baker professor of real estate at the Cornell University School of Hotel Administration and senior advisor to PKF-HR.  "The hotel cycle is a hybrid of the business cycle on the demand side and an endemic cyclical pattern of the real estate market on the supply side.  The shape of hotel market movements over time begins with the connection to the business cycle, but then takes its final form as the result of the considerable time required to construct new hotels to be built in response to increases in hospitality demand.  Therefore, the market tends to 'hang' for a lengthy period at the peak until construction accelerates.  Conversely, the market 'hangs' in the trough because hotels are not demolished simply because demand is weak."

While news of growth on the top-line is encouraging, a series of factors contribute to a projection of continued declines in unit-level profits.  PKF-HR forecasts U.S. hotel occupancy levels to increase 3.4 percent in 2010, but average daily room rates (ADR) are projected to drop 1.6 percent.  The increased number of guests will require hotels to incur additional operating costs, such as housekeeping staff, laundry, guest supplies and energy consumption.  Meanwhile, on average, guests will be paying less to rent their rooms.

"Unfortunately, the composition of hotel revenue growth we forecast for 2010 is not very profitable," Woodworth said.  "This is consistent with the pattern we have seen coming out of past industry recessions.  Price increases lag demand growth.  Greater profits lag increases in revenue."

Local Markets

Hoteliers in 49 of the 50 markets (Houston was the exception) covered within the PKF-HR Horizons® universe sold more rooms in the first quarter of 2010 than a year earlier, according to STR.  "It's encouraging to see such widespread growth in hotel demand.  This recovery is not just isolated to the major gateway markets," Woodworth observed.

Conversely, pricing remained weak as ADR levels in 49 of the 50 markets experienced a year-over-year decline during the first quarter of 2010.  Miami, which hosted the Super Bowl in February, was the outlier.  Given these declines in ADR, only 20 of the 50 cities achieved a RevPAR increase.

"For the entirety of 2010 we expect that 40 of our 50 key markets will realize occupancy increases, although continued downward pressure on pricing will limit annual ADR growth to just 14 markets," Woodworth projected.  "The expectation that demand will outpace increases in hotel supply in so many communities will lead to RevPAR growth in 29 Horizons® cities."


Amongst the hotel chain scales, demand growth in 2010 will be strongest for luxury properties, followed closely by upscale hotels. While all chain scales are forecast to experience declines in ADR this year, four of seven should realize RevPAR gains.  As expected, luxury hotels RevPAR forecast will be strongest, while midscale properties with food and beverage should lag all property types with a 3.3 percent RevPAR decline.

"Luxury properties historically have experienced the greatest declines in hotel performance during recessions, but tend to rebound relatively quickly.  Our 6.0 percent increase in RevPAR for luxury hotels in 2010 is consistent with this trend," Woodworth said.  Demand for luxury hotels is forecast to rise a very strong 11.1 percent in 2010, but the discounting needed to entice upscale travelers will result in a 2.5 percent decline in ADR.

Pick Up in 2011

Hotel NOI growth is expected to accelerate dramatically in 2011.  PKF-HR forecasts RevPAR to grow 7.8 percent in 2011.  "Our econometric forecast model is driven by macro economic variables provided by Moody's, and their outlook for 2011 is very strong," said Corgel.  "Moody's economic forecast developed in April of 2010 calls for a 3.3 percent increase in real personal income and a 1.6 percent rise in employment.  We have translated these variables into a 3.4 percent increase in lodging demand and a 4.6 percent lift in ADR.  Both of these lodging measures are well above their respective long-term averages."

Unlike 2010, the composition of hotel revenue growth in 2011 should yield strong gains in hotel profits.  The 4.6 forecast rise in ADR, combined with a 3.1 gain in occupied rooms, will help drive unit-level profits up 18.3 percent.

"Clearly we are in the early stages of what should be a period of exceptional operating performance for the U.S. lodging industry.  Our forecasts for lodging demand and ADR growth are very strong through 2014, while the threat of new competition is limited.  However, one cannot ignore the depth of the 2009 recession and what was occurring in the real estate and financial markets.  This is going to be an extended revival for hotel operators, and an even longer recovery for hotel owners," Woodworth concluded.

Hotel Horizons® is a series of econometrically derived forecast reports developed by PKF Hospitality Research.  The reports cover 50 of the largest U.S. hotel markets, as well as the nation as a whole, six location attributes, and six chain scales.  Economic forecasts by Moody's and historic hotel performance data and future supply pipeline information from Smith Travel Research are used to construct the industry's most comprehensive forecasts of U.S. lodging market behavior.

To purchase Hotel Horizons® forecast reports for the United States, or one of 50 individual markets, please visit the firm's online store at, or call (866) 842-8754.

PKF Hospitality Research produces Hotel Horizons®, an econometrically based hotel forecast, Trends® in the Hotel Industry, a historical hotel financial publication, Benchmarker(SM), a customized comparative hotel benchmark report, and other custom hotel research  services.  PKF Consulting offers hotel appraisal and hotel valuation services, hotel market studies, hospitality litigation support, and hotel advisory services.  PKF Capital offers hotel brokerage and hotel transaction services.

U.S. Lodging Industry

Annual Change

2009 Actual

2010 Forecast
















Unit-Level NOI*



Note: * Before deductions for capital reserve, rent, interest, income taxes, depreciation, and amortization.

Source: PKF Hospitality Research, May 2010 Hotel Horizons® Report


Mark Woodworth
PKF Hospitality Research
3475 Lenox Road, Suite 720
Atlanta, GA  30326   20170
(404) 842-1150, ext 222

Chris Daly or Jerry Daly (media)
Daly Gray Public Relations
620 Herndon Parkway
Suite 115
Herndon, VA  20170
(703) 435-6293


Also See: Bottoms Down: New PKF Hospitality Research Survey Results Show Hotel Profits Declined a Record 35.4 Percent in 2009; Greatest Annual Decline Since Tracking Began in the 1930's / May 2010

U.S. Hotels Should Enjoy Double-digit Revenue Growth by 2012 According to PKF Hospitality Research / March 2010

2010 Will Continue to be a Tough Year for U.S. Hotel Owners and Operators; 2010 U.S Lodging ADR Now Forecasted by PKF at Minus 1.5% from 2009 ADR / December 2009

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