Increased corporate travel and a strong leisure market combined for positive hotel growth last year and that should continue in 2007, according to the 2007 Lodging Report released by Ernst & Young.
“The hospitality market in the US continues to move forward, overcoming the challenges posed by numerous natural disasters and human conflicts over the last seven years,” said Michael Fishbin, National Director US Hospitality & Leisure practice, Ernst & Young. He added:
“In fact, business travel has strengthened significantly in the last 12 months thanks to lower domestic airfares as well as corporate travel departments lowering costs through advance ticket purchases.”
This, in turn, has led to strong demand for hotel rooms, pushing up prices, in traditional corporate destinations such as Manhattan, Chicago, San Francisco, Los Angeles and Boston, according to the survey.
“The bad news is that travelers will have to get used to the sticker shock in 2007,” Mr Fishbin said. “With only moderate growth in the supply of new hotels being built in the US, occupancy rates for existing hotels are expected to remain fairly stable this year and into 2008, giving hoteliers the opportunity to keep rates high or even raise them further during periods of high demand.”
Revenue per available room (RevPAR) – a key indicator of hotel sector performance – was at its peak across all segments of the market in 2000 and has been steadily rising again following a sharp decline in the aftermath of 9/11.
In 2006, the market saw solid gains in two leading indicators of performance – average daily room rate (ADR) and RevPAR – both of which increased by more than 7% over the prior year.
“We are expecting increases in the six percent range for ADR and RevPar in 2007. Manhattan, Chicago, San Francisco, Boston, Dallas, Los Angeles and Phoenix are likely to benefit from the strong projected performance of the luxury and upper upscale segments of the hotel market,” Mr Fishbin said.
Luxury hotels enjoyed the highest growth in ADR in 2006 (8.7 percent) and the segment is expected to be the only area to outperform the overall US hotel market in terms of ADR this year, according to Smith Travel Research.
Report by David Wilkening
