Citing a "strong surge" in lodging demand that occurred during the first half of 2010, research firm Colliers PKF Hospitality Research (PKF-HR) has revised upward its 2010 forecast for the U.S. lodging industry, it announced this week.
Following a 37.8 percent cumulative decline in profits from 2007 through 2009, PKF-HR now predicts a 2.3 percent increase in net operating income (NOI) for 2010 — the first forecasted annual increase in NOI since 2007.
"The bottom-line losses suffered by hotel owners over the past two years were devastating, and the repercussions have been, and continue to be, felt throughout the financial community," PKF-HR President R. Mark Woodworth said in a statement. "The likelihood that this trauma is coming to an end is welcome news. With occupancy driving the growth in RevPAR in 2010, the rise in profits at this stage is somewhat underwhelming. However, going forward we will begin to see a more profitable formula for revenue growth as operators reclaim pricing leverage and room rates begin to rise. That being said, operators must pay attention to the significant increases in operating costs that we've consistently observed during past recovery periods."
In the September 2010 edition of its "Hotel Horizons" forecast, PKF-HR predicts a 4.6 percent increase in revenue per available room (RevPAR) and a 5.2 percent increase in occupancy, but a 0.6 percent decline in average room rates (ADR).
"Our analysis confirms that the sharp rise in demand during the first half of 2010 is partially attributable to the low level of room rates," Woodworth continued.
Despite its optimism for 2010, PKF-HR has softened its projections for 2011. It now predicts a 5.9 percent increase in RevPAR next year, down from its previous prediction of 7.8 percent, made in June. Meanwhile, it predicts a 2.1 percent increase in occupancy and — good news for hotels — a 3.8 percent increase in ADR, as well as a 10.8 percent increase in NOI.
"It's not that we are becoming less bullish on 2011," Woodworth said. "It's more that the 2010 recovery is happening at a quicker pace."