The hotel market will cool in 2008 but remain a seller’s market, according to PKF Hospitality Research, Atlanta.
PKF is projecting a 4.5 percent gain in revenue per available room (), the slowest pace of growth since 2003. Occupancy levels are expected to decline slightly (-0.7 percent), while average daily room rates (ADR) should increase 5.3 percent. Both of these numbers are down from 2007, PKF says.
“Given the cyclical nature of the lodging industry, a slowdown in performance does not come unexpectedly,” stated Mark Woodworth, president, PKF Hospitality Research, in a news release. “Hotel construction activity is picking up and will cause a modest imbalance between supply and demand.”
PKF forecasts a 2.6 percent increase in lodging supply in 2008, or approximately 115,000 new hotel rooms—the most since 2000. Most of the new supply this year will be in the upscale and midscale (without food and beverage outlets) segments. Properties in these categories typically contain a limited amount of public space, which makes them relatively cost-effective to build. Conversely, PKF anticipates declining inventory in the midscale (those with food and beverage outlets) category.
The number of planned hotel projects is at an all-time high, states PKF, but only a small number are actually breaking ground due to the high costs of construction and land. In many cases, the purchase and renovation of an existing hotel is more feasible than the construction of a new property, the report states.
“We do not believe 2008 will be a difficult year for hotel managers, but they will face more difficult decisions regarding pricing, cost controls, and,” stated Woodworth. “For the most part, 2008 will still be a seller’s market, but a softening economy will make travelers more price sensitive than they have been the past three years.”