PKF Revises 2010 Hotel Forecast, Sees Less Severe Rate Decline

PKF Hospitality Research yesterday raised its expectations of U.S. hotel demand and rate performance for 2010, based on a better-than-expected performance in the third quarter of this year.

The firm still expects 2010 rates to decline compared with 2009 levels, but it now is forecasting that level of decline to be 1.5 percent. That is about half the level of the 3.1 percent decline PKF issued in its September forecast.

"We are forecasting that, on average, properties will continue to suffer year-over-year declines in revenue and profits from an already dismal 2009," PKF Hospitality Research President Mark Woodworth said in a statement. "However, given the deceleration of room rate discounting that we observed during the third quarter of 2009, we believe the severity of the losses incurred in 2009 and 2010 will be less than previously forecast."

The forecast update comes after rates did not decline to the level PKF had forecast for the third quarter of 2009. Smith Travel Research reported a 9.8 percent year-over-year decline for the quarter, 2.2 percentage points better than PKF's forecast from earlier in the year.

PKF also improved its demand outlook. It now expects demand to rise 1.9 percent in 2010, up from its September forecast of 1.6 percent. This outpaces the expected supply growth levels, leading to an occupancy increase of 0.4 percent in 2010, the first time the metric has increased in three years, according to PKF.

The firm said lodging demand would post a year-over-year increase in the first quarter of 2010, its first increase after eight consecutive quarters of decline.

—Nielsen Business Media