It looks like this year won’t be quite as bad as anticipated for the hotel industry, after all.

Smith Travel Research has updated its forecast for 2010 to reflect a stronger performance than previously predicted in the three main metrics—occupancy, revenue per available room, and average daily rate.

STR’s revised forecast for 2010 shows a 2 percent increase in occupancy, to 56 percent, and a 2 percent decrease in average daily rate, to $95.45. RevPAR is expected to end the year virtually flat, at $53.22. Previously, STR had predicted occupancy to be flat, ADR to decrease 3 percent, and RevPAR to be down 4 percent.

"The takeaway is that 2010 is going to be significantly better than (hoteliers) thought it would be," said Mark Lomanno, STR’s president. While it won’t be back to 2007 or 2008 levels, it will be an improvement over 2009.

Looking ahead, 2011 is expected to be even better. STR says occupancy will increase 2 percent, to 57 percent; ADR will rise 3.5 percent, to $98.79; and RevPAR will jump 5 percent, to $56.12.

Hotel Construction Wanes
What may be helping occupancy rates is a significant slowdown in the construction pipeline. There were 36 percent fewer hotel rooms under development in March 2010 compared to March 2009. In total, the U.S. hotel development pipeline includes 3,399 active projects comprising 354,538 rooms, according to the March 2010 “STR/TWR/Dodge Construction Pipeline Report.”

"Most markets are experiencing a degree of decline in the number of rooms in construction; however, for some, the change from last year is astounding," said Duane Vinson, vice president at STR, in a press release. For example, Orlando went from 5,900 rooms under construction last March to fewer than 1,300 this March, while Phoenix went from nearly 4,750 rooms in the works to just over 800, said Vinson. Most striking is Las Vegas, which had 10,600 rooms in the pipeline last March and now has fewer than 1,600.

"Fifteen of the top 25 markets have more than a 50 percent decline in year-over-year rooms in construction," Vinson said.