It looks as if meeting planners are heading straight into a seller's market, according to the 2005 U.S. Lodging Forecast by PricewaterhouseCoopers. “The balance of power has shifted, especially during higher occupancy periods,” says PWC's Bjorn Hanson, global hospitality industry managing partner, New York City.
This shift applies to not only room rates but also to food and beverage, meeting room charges, and other meeting-related costs. “In many ways, next year will seem more of a challenge in negotiations than 2000,” Hanson says.
The average daily rate is expected to rise 3.7 percent by year's end, to $86.03, up sharply from $83.08 at the end of 2003. ADR growth was essentially flat in 2003, with negative growth the two previous years. Looking ahead, PWC anticipates similar ADR increases in 2005 (3.5 percent) and 2006 (3.4 percent).
Year-end average occupancy rate for 2004 is forecast to climb to 60.6 percent in 2004, up from 59.2 percent last year. Over the next two years, the average occupancy rate is expected to increase to 61.5 percent in 2005 and 62.1 percent in 2006. PWC attributes the increase to a combination of economic growth and moderate expansion (1.3 percent) in hotel room supply.
Luxury properties are the biggest benefactors of the economic recovery: The year-end average occupancy rate is projected to rise 2.8 percent for 2004, with economy properties likely to end the year with the lowest ADR and occupancy increases.
PWC expects revenue per available room to leap 6.3 percent in 2004 — the largest one-year hike since 1984. The hike in RevPAR, a key indicator of hotel profitability, is a sign of recovery for an industry that has experienced negative or flat RevPAR growth over the past three years. PWC projects a RevPAR jump of 5 percent in 2005 and 4.5 percent in 2006.