The U.S. hotel industry in 2011 marked gains in all three key metrics—occupancy, average daily rate, and revenue per available room. While the numbers are expected to climb again in 2012, increases will be more moderate, according to industry forecasts.

Occupancy: The hotel industry ends 2011 with an occupancy rate of 59.9 percent, predicts Smith Travel Research in Hendersonville, Ky., about a 4 percent rise over 2010. STR expects slower growth in 2012, with occupancy climbing slightly to 60 percent.
Average daily rate: ADR rose about 4 percent this year. STR predicts the same increase in 2012.
Revenue per available room: RevPAR for 2011 will close at $60.81, up almost 8 percent over 2010. In 2012, STR sees another 4 percent rise.

PKF Hospitality Consulting has slightly higher expectations for RevPAR—up 6 percent in 2012—according to its recently released forecasts. ”Analyzing the performance of U.S. hotels in 2010 and 2011, we have seen the progression of indicators that one would expect during an industry recovery. Occupancy levels increased in 2010, followed by real average daily rate growth in 2011,” said Mark Woodworth, president of PKF Hospitality Research. "The only surprise has been the pace and magnitude of the surge in hotel demand." Demand was up 5 percent in 2011, according to both STR and PKF.

Looking forward to 2012, Woodworth sees continued signs of recovery for the hotel industry. “Owners and operators are now focused on more aggressive pricing policies, which will translate into strong growth in hotel profits. We believe market conditions during the next few years will allow them to achieve these goals.”

The Economy’s Dampening Effect?
However, Amanda Hite, president of STR, warns that the lack of growth in the overall macroeconomic indicators is cause for concern heading into 2012. “Our revised forecast reflects an industry posting record levels of demand, operating in an environment where the economic fundamentals cannot be ignored.”

Performance will vary by tier in 2012, added Woodworth. "The imbalance of lodging performance is extremely evident when observing the forecast occupancy levels by chain-scale," he said. "Hotels operating in the upper-tier (luxury, upper-upscale, upscale) segments are all forecast to achieve occupancies above 70 percent in both 2012 and 2013, which will exceed their long-term average occupancy levels. Conversely, hotels in the lower-priced chain-scales will continue to achieve occupancy levels below their long-term average through 2013." Subsequently, rate increases will be higher in the upper-tier hotels than the lower-tier hotels.

Overall, Woodworth expects a favorable year for hotels in 2012, but much will also depend on the economic conditions in the local markets. “Hotel performance will be great for some in 2012, but others will continue to struggle."