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Despite Near-term Economic Uncertainty, U.S. Lodging Recovery
Remains Intact, Says PwC U.S. Report

August 28, 2012 - Despite persistent economic headwinds and heightened uncertainty, an updated lodging forecast released today by PwC US anticipates revenue per available room ("RevPAR") recovery in 2012 to remain intact, with slightly stronger gains in both demand and pricing than previously anticipated. While the US economy has inched forward in recent quarters, business and leisure travel continues to recover, with hotels experiencing solid demand and price gains in the second quarter. These recent gains, coupled with year-over-year improvement in group bookings currently in place for the balance of the year, off-set slowing related to the near-term weakness in economic fundamentals. As a result, US RevPAR is now expected to increase 7.2 percent in 2012 and 5.6 percent in 2013.

PwC's updated estimates are based on a quarterly econometric analysis of the lodging sector, using historical statistics supplied by Smith Travel Research and other data providers, and an updated macroeconomic forecast released from Macroeconomic Advisers, LLC. Macroeconomic Advisers' August outlook expects slower economic growth in 2012 than it previously anticipated, followed by gradual improvement in 2013, with real gross domestic product ("GDP") increasing 1.8 percent in 2012, followed by an increase of 3.0 percent in 2013, measured on a fourth quarter over fourth quarter basis.

PwC's outlook for RevPAR recovery reflects continued momentum in business travel, including gains in corporate meetings, as well as leisure travel growth that includes greater volume from international visitors. Year-to-date RevPAR through July was 7.3 percent ahead of last year. While results for July were weaker (4.3 percent RevPAR growth), in part due to the timing of Independence Day and the start of Ramadan, preliminary results from Smith Travel Research for the first 18 days of August show an approximately 7.2 percent increase in RevPAR. Overall, PwC expects lodging demand in 2012 to increase 3.0 percent, which combined with still restrained supply growth of 0.5 percent, is anticipated to boost occupancy levels to 61.5 percent, the highest since 2007. While hotels across the spectrum of price tiers are benefiting from the recovery, hotels in the higher-priced segments are expected to experience the strongest gains. Occupancy levels at hotels in the luxury, upper-upscale and upscale segments are expected to meet or exceed each segment's recent peak in 2007. As stronger business transient and group activity returns to the higher-priced hotels, revenue management tactics are anticipated to drive increased pricing, resulting in a continuation of meaningful RevPAR gains. Hotels in the lower-priced segments have not experienced as solid of a recovery in occupancy, but are still expected to realize increased room rates as demand gradually strengthens.

"PwC continues to have an above-consensus outlook," said Scott D. Berman, principal and US industry leader, hospitality & leisure, PwC. "With occupancy surpassing recent prior peak levels in the luxury, upper upscale, and upscale segments, the lodging recovery is intact."

A full copy of PwC's US Lodging Forecast can be accessed by visiting:

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© 2012 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC refers to the US member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see for further details.

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

Laura Schooler

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