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PKF Hospitality Research Forecasts RevPAR for U.S. Hotels to Rise 5.8% in 2012

Stage Set For Increased Capital Investment

March 19, 2012, Atlanta, Ga. – With nearly two years of momentum behind it, the U.S. lodging industry’s fundamentals are projected to continue to be positive through 2016.  According to the March 2012 edition of Hotel Horizons®, PKF Hospitality Research, LLC (PKF-HR) forecasts that rooms revenue (RevPAR) for U.S. hotels will rise 5.8 percent in 2012, the result of a 1.6 percent increase in occupancy and a 4.1 percent gain in average daily room rates (ADR).  With solid financial footing more assured, PKF-HR predicts greater profitability for the next two years and an increase in hotel investment.

“The metrics that owners, lenders and other parties invested in hotel real estate monitor to understand the health of the industry remain positive,” said R. Mark Woodworth, president of PKF-HR. “Ever since the first quarter of 2010, growth in lodging demand has greatly exceeded the supply increase. We have seen six straight quarters of ADR growth, and are confident forecasting a sustained period of attractive industry profit growth.”

According to Smith Travel Research (STR), U.S. hotels rented more guest rooms in 2011 than ever before. On a local level, PKF-HR observed new records in metro-level lodging demand in 30 of the 50 markets covered by its Hotel Horizons® forecast reports.

U.S. Lodging Forecast
Major Indicators
Change From Prior Year


2011 Actual

2012 Forecast

Unit-Level NOI*

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

Sources: PKF Hospitality Research - March 2012 Hotel Horizons® report, Smith Travel Research

Amplifying the positive impact of the lofty levels of demand is the limited amount of new hotel supply projected to enter the market over the next five years. According STR, the average annual change in the nation’s lodging supply from 1988 through 2011 was 2.1 percent. PKF-HR anticipates that new supply growth will remain below that level through 2016, less than 2.0 percent annually. With supply suppressed, PKF-HR forecasts annual occupancy gains through 2015. Add this to the annual occupancy increases observed in 2010 and 2011, and the industry will experience an unprecedented six-year run of occupancy growth.

“With occupancy levels expected to exceed the STR long-run average of 61.9 percent in 2013 and beyond, we are beginning to see operators capitalize on these favorable market conditions and increase room rates,” Woodworth said. “We expect to see average daily room rates increase in excess of 4.0 percent per year through 2014.

“In addition to growth in top-line revenue, hotel managers have implemented policies and practices that have enhanced the productivity of hotel operations, thus resulting in strong bottom-line gains. Individual hotel profits already have increased by 30 percent since 2009. Our current forecast calls for profits to continue to grow at an average annual rate of 10.3 percent though 2014, which is a substantial increase over the long-run average of 3.9 percent,” said Woodworth.

Midscale Picking Up

Hotels in the upper-tier chain-scale segments (luxury, upper-upscale, and upscale) have enjoyed the greatest gains in RevPAR since the depths of the 2009 recession. Hotels in the lower-tier categories (upper-midscale, midscale, and economy) also have achieved increases in RevPAR during this same time period, but at a slower pace.

2012 RevPAR Forecast - By Chain-Scale


2012 RevPAR Change


Source: PKF Hospitality Research - March 2012 Hotel Horizons® report.

“In 2010 and 2011, rising corporate profits and greater job security for high-income individuals helped to support the upper-tier properties,” Woodworth noted. “The buying power for these groups is expected to remain strong so we are forecasting that the national occupancy level for hotels in each of the upper-tier chain-scales will exceed 70 percent through 2016.

“With occupancy levels above the 70 percent mark, lack of availability during peak periods will become more common at the nation’s upper-tier properties, yielding greater pricing power for property revenue managers. As a result, some travelers will begin to trade down on their lodging selections, which will benefit more moderately-priced hotels,” Woodworth said.

Further enhancing the prospects for lower-tier hotels is a shift in the economic outlook. Moody’s Analytics, the basis for PKF-HR’s economic forecasts, projects continued increases in employment that eventually will benefit midscale and economy hotels.

Potential Oil Slick

The situation with Iran is the only foreseeable obstacle to PKF-HR’s optimistic forecasts. “The US lodging industry can sustain positive performance despite moderate increases in the prices of oil and gas,” said John B. (Jack) 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. “Military hostilities are a greater concern because of the negative impact on the availability of oil and on international travel. Limits on both the availability of gas at local pumps, and transportation system disruptions impact the psyche of travelers beyond gas prices.”

PKF-HR’s forecast is based upon Moody’s January 2012 economic forecast, which assumes no disruption to the supply of oil from the Middle East and that the price of oil will remain below $110 a barrel throughout 2012.

Near-Term Nirvana

“US hoteliers have never enjoyed such an extended period of favorable market conditions. We are in the midst of a six-year run during which lodging demand will outpace supply, hotel revenues will increase a cumulative 43.7 percent, and unit-level net operating income will rise 83.2 percent. This is truly unprecedented and will likely result in accelerated, and significantly greater, levels of capital investment into the domestic lodging industry,” Woodworth concluded.

To purchase a March 2012 Hotel Horizon® report, please visit Reports are available for each of 50 major metropolitan areas in the U.S., and contain five year projections of supply, demand, occupancy, ADR, and RevPAR.


Headquartered in San Francisco, PKF Consulting USA, LLC ( is an advisory and real estate firm specializing in the hospitality industry. PKF Consulting USA is owned by FirstService Corporation (FSRV) and is a subsidiary of Colliers International. The firm operates two companies: PKF Consulting USA and PKF Hospitality Research. The firm has offices in New York, Boston, Portland ME, Indianapolis, Chicago, Philadelphia, Washington DC, Atlanta, Jacksonville, Tampa, Houston, Dallas, Los Angeles, Bozeman, and San Francisco.


PKF Hospitality Research
R. Mark Woodworth, 404-842-1150, ext 222
Daly Gray Public Relations
Chris Daly, 703-435-6293

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