Economic Revival in Second Half of 2003 Builds Momentum for Robust Lodging Demand Recovery in 2004

According to PricewaterhouseCoopers’
September 2003 Hospitality Directions Forecast Alert, the strong recovery staged by the lodging industry in the late summer builds momentum for robust lodging demand recovery in 2004.Given slight upward revisions to already strong real GDP growth forecasts and downward revisions to inflation forecasts in the next two years, PricewaterhouseCoopers now forecasts RevPAR (revenue per available room) to stabilize in 2003 at 0.2 percent, and then increase by 4.9 percent in 2004 and 3.4 percent in 2005.

PricewaterhouseCoopers forecasts that between the second and the fourth quarters of 2003, seasonally adjusted lodging demand will increase by 4.2 percent. This translates to a 3.2 percent improvement in occupied room nights in the second half of 2003 over the same period in 2002. Seasonally adjusted occupancy will rise to 60.1 percent by the fourth quarter of 2003 from 58.1 percent in the second quarter.

“Overall growth in the economy, evidenced by the recovery of the equity markets and the corporate sector and indices which indicate that this rebound will endure, are precisely what the lodging industry needs for business travel to rebound strongly.” said Bjorn Hanson Ph.D., Global Industry Leader, PricewaterhouseCoopers Hospitality & Leisure Practice. “The cumulative improvements in the next two years will help regain more than a third of the 14.4 percent cumulative RevPAR loss in the 2001 to 2003 period.”

Key predictions from PricewaterhouseCoopers include:

-Lodging demand will expand by 4.0 percent in 2004 and 2.8 percent in 2005. After five consecutive quarters of occupancy gains, ADR increases will strengthen by the third quarter of 2004, and become the larger contributor to RevPAR advances. Seasonally adjusted ADR is expected to rise by 2.9 percent between the second and the fourth quarter of 2003.
-Occupancy will advance to 60.8 percent and 61.6 percent in the next two years.
-RevPAR is expected to stabilize in 2003, with occupancy increasing by 0.1 percent from 2002 level to 59.2 percent. RevPAR in 2004 is forecast to rise by 4.9 percent to $51.92 which translates to a 3.7 percent gain in real RevPAR from the previous year.