Market Report U.S.

PKF Forecasts Record Performance for U.S. Hotels

According to the recently released June 2014 edition of PKF Hospitality Research, LLC’s (PKF-HR) Hotel Horizons ® forecast report, the U.S. lodging industry will achieve an occupancy level of 63.6 percent in 2014, topping the pre-recession peak of 63.1 percent.


According to the recently released June 2014 edition of PKF Hospitality Research, LLC’s (PKF-HR) Hotel Horizons ® forecast report, the U.S. lodging industry will achieve an occupancy level of 63.6 percent in 2014, topping the pre-recession peak of 63.1 percent reported by STR, Inc. (STR) in 2006. Given this favorable balance between supply and demand, R. Mark Woodworth, president of PKF-HR predicts that hotel owners and operators will begin to see real (inflation adjusted) recoveries in average daily rates (ADR) and net operating income (NOI).

“The domestic hotel industry is operating at peak performance. We can stop using the term ‘recovery,’” said Woodworth. “The U.S. lodging industry is at a place in the business cycle where a confluence of market and operational factors will lead to impressive performance on both the top- and bottom-line. In 2014 and 2015, our firm is forecasting several all-time highs for some of the most important metrics in the hotel business.

By year-end 2015, PKF-HR projects that the U.S. lodging industry will have achieved the following milestones:

  • A fourth year of accommodated demand in excess of the pre-recession peak of 11.3 million room nights.
  • Six consecutive years of increasing occupancy, the longest such streak since 1988.
  • An occupancy level of 64.6 percent, the highest level of occupancy since 1995.
  • 15 of the 55 markets in the Hotel Horizons ® universe will achieve their highest occupancy levels in the past 25 years.
  • Five consecutive years of real ADR growth, leading to a full recovery in real terms from pre-recession levels.
  • Six consecutive years of real revenue per available room (RevPAR) gains.
  • Six consecutive years of real NOI gains, leading to a real recovery from pre-recession levels.
U.S. Lodging Industry

Forecast Performance

Change: 2013 to 2014




Change From 2013

Supply         1.0%
Demand         3.2%
Occupancy         2.2%
ADR         4.4%
RevPAR         6.7%
Total RevPAR         6.3%
Operating Expenses         3.9%
Unit-Level NOI*         12.5%
U.S. Lodging Industry
Indexed Real (Inflation Adjusted) ADR
2007 = 100



Indexed Real ADR

1988         91.1
1989         90.4
1990         88.6
1991         85.0
1992         83.8
1993         83.3
1994         84.2
1995         85.8
1996         88.7
1997         91.8
1998         94.5
1999         95.8
2000         97.7
2001         93.8
2002         91.2
2003         89.3
2004         90.7
2005         92.6
2006         96.4
2007         100.0
2008         99.1
2009         91.0
2010         89.4
2011         90.0
2012         91.8
2013         94.0
2014F         96.4
2015F         100.0
Sources:     Moody's Analytics, STR, Inc.

PKF Hospitality Research (forecast), June - August 2014 Hotel Horizons ®


“Most everyone is enjoying the benefits of life in the sweet spot. However, it is natural for people to begin to worry about their ability to sustain such peak performance,” Woodworth stated.

An Absence of Obstacles

To assess how long the U.S. lodging industry will be able to maintain the current elevated levels of operating performance, PKF-HR examined the factors that derailed industry performance in the past.

“A review of past lodging cycles reveals that five events, either on their own or in some combination, have brought an end to the good times,” said John B. (Jack) Corgel, PhD., the Robert C. Baker professor of real estate at the Cornell University School of Hotel Administration and senior advisor to PKF-HR. “Fortunately, some of the factors that have historically triggered the turning point at which cyclical declines commence appear benign, while other factors are entirely unexpected.”

An analysis of these phenomena, along with an assessment of the prospects for their near-term recurrence, follows:

  1. The Economy: Although the initial quarter of 2014 reflected essentially no economic expansion, most leading prognosticators expect above-trend growth for the balance of this year and the next. Thus, the economy does not appear to be a near, or even mid-term, threat to the good fortunes of U.S. hotels.
  2. Oil/Energy Price Spike: Domestic energy production in the U.S. is at an all-time high, and experts believe that American dependency on foreign sources will continue to decline. Price volatility brought on by global unrest, most notably in the Middle East and Russia, has escalated oil prices heading into the 2014 summer travel season. Most experts, however, do not expect continued high price increases to persist. Therefore, a threat to the health of the U.S. hotel industry does not appear imminent.
  3. Asset Bubble: While home prices continue to improve, they remain well below previous peaks in the vast majority of markets. The stock market may be a different matter. Mid-way through Q2 2014, the market is at an all-time high. Will the on-going tapering of the Federal Reserve’s monthly bond-buying program cause a severe downturn in equity markets and thus damage the economy? Hard to tell, but most do not seem to think so. As such, no apparent threat here.
  4. Overbuilding: History tells us that too many rooms, too soon, also can bring an end to prosperous times for hotels. On a four-quarter moving average basis, supply growth peaked at 3.0 percent in Q1 2009, a full point above the STR historical, long-run average. Our current Hotel Horizons ® forecast calls for supply growth of 1.0 percent in 2014 and another 1.3 percent increase in 2015. Therefore, it does not appear that overbuilding in the near term is a threat.

“The one detrimental factor we cannot anticipate is an unpredictable demand shock,” Woodworth said. “The events of September 11, 2001 and the depth of the Great Recession clearly demonstrated that the impact of these types of phenomena on lodging demand and operating profits occurs quickly and can be devastating.”

Reap the Benefits

“We have enough experience and data to know that the hotel industry is a cyclical business. However, at this time in the cycle, our forecasts have proven to be most accurate, and all we see for the foreseeable future is a period of persistent, positive performance. This consistent, predictable and profitable environment offers all industry participants ample opportunities to make money during the next few years,” concluded Woodworth.

Graph - U.S. Lodging Industry Performance - Change 2013 to 2014

Graph - U.S. Lodging Industry Indexed ADR

To purchase a June 2014 Hotel Horizons ® report, please visit . Reports are available for each of 55 major metropolitan areas in the U.S., and contain five year projections of supply, demand, occupancy, ADR, and RevPAR. ABOUT PKF CONSULTING USA, LLC

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, LLC. and PKF Hospitality Research, LLC. The firm has offices in New York, Boston, Indianapolis, Chicago, Philadelphia, Washington DC, Atlanta, Jacksonville, Tampa/Orlando, Houston/Dallas, Los Angeles, Bozeman, and San Francisco.

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