BOSTON—Contrary to popular belief, the hotel industry is making headway in terms of pricing.
Average daily rate is growing at the same rate it did coming out of previous downturns, said Aran Ryan, director of hospitality and leisure for PricewaterhouseCoopers. Presenting an industry update at LodgeNet’s Customer Technology Symposium in Boston, Ryan said hoteliers are showing better pricing discipline.
“Third-quarter numbers are coming in higher than our expectations,” he said. “In general we’re optimistic about ADR going forward.”
PwC’s forecast for year-over-year ADR growth to close out 2010 is up 0.4% and the company is forecasting 4.1% year-over-year growth for 2011.
Demand returns
Overall, Ryan is bullish on the industry’s fundamentals, saying most demand numbers are back to pre-recession levels.
“We were at a point where we were asking if travel was ever going to come back,” he said. “It’s pretty remarkable to see data from the past 12 months.”
Ryan did caution, however, that demand fell slightly from summer to fall last year and could do so again in 2010. Fortunately, he said, supply growth has decreased dramatically. “We have seen the slowdown in supply that everyone anticipated,” he said.
Further, the recovery will be aided by the fact that supply was cut off earlier in the cycle than during the previous downturn, he said. The capital markets dried up earlier and the hotel industry entered the downturn with fewer rooms in the pipeline than previous cycles.
As travel continues to recover, Ryan suggested the industry will see mixed results by chain scale and market.
“Travelers will get pushed back into the chain scales they were used to being in,” he said.
Room for growth
And, although rate and revenue per available room numbers are growing at positive increments, hoteliers still have plenty of room for growth in these areas. Therefore, several years of a positive cycle will play out, Ryan said.
Another positive indicator is travel to the United States from international countries, which Ryan said is “resilient.”
“As we entered this recession, we were experiencing good growth from international travel,” he said. “It’s going to be an important source of growth moving forward.”
Looking back now that numbers are again trending upward, Ryan said the recession could have had a much worse effect on hotels.
“Travel has come back, but job growth hasn’t, and that could be a positive sign for the lodging industry,” he said. “We could have fallen as far as the unemployment numbers did, but we didn’t. Lodging demand has come back quicker than unemployment.”