Owners of shabby hotels nationwide would do well to clean up their act, lest they miss out on admittedly uneven, but continued, growth in hotel market fundamentals, according to a new report from San Francisco-based hospitality industry advisor PKF Consulting.
PKF determined that upper-scale lodgings look to exceed their long-term occupancy trends through 2013, while lower-priced chains will not.
"The imbalance of lodging performance is extremely evident when observing the forecast occupancy levels by chain-scale," said R. Mark Woodworth, president of PKF-Hospitality Research. "Hotels operating in the upper-tier (luxury, upper-upscale, upscale) segments are all forecast to achieve occupancies above 70 percent in both 2012 and 2013, which will exceed their long-term average occupancy levels. Conversely, hotels in the lower-priced chain-scales will continue to achieve occupancy levels below their long-term average through 2013."
With occupancy levels for upper-tier hotels forecast to exceed the 70 percent level, average daily rate (ADR) growth for these properties will exceed the ADR increases projected for lower-tier hotels. Still, all chain-scale segments are forecast to surpass their long-term average annual ADR growth rates in both 2012 and 2013.
PKF is forecasting national lodging demand to grow 2 percent in 2012. This is less than the annual growth rates observed in 2010 (+7.4 percent as reported by Smith Travel Research) and projected for 2011 (+4.8 percent), the company said.
"Industry participants should not be alarmed," John B. (Jack) Corgel , the Robert C. Baker Professor of Real Estate at the Cornell University School of Hotel Administration and senior advisor to PKF, said in a statement. "The pace of growth for indicators such as demand, occupancy, [revenue per available room], and net operating income will be slightly less in 2012 than they were in 2011. This does not mean the industry is slipping back into a recession. A deceleration in growth is to be expected at times during a recovery. The trajectory of performance is still on the rise, just not as steep."
