The U.S. hotel industry is projected to end 2010 with increases in two of the three key performance

The U.S. hotel industry is projected to end 2010 with increases in two of the three key performance

The U.S. hotel industry is projected to end 2010 with increases in two of the three key performance measurements, according to STR’s monthly forecast update.

STR projects 2010 occupancy to increase 3.6 percent to 56.7 percent, ADR is expected to end the year virtually flat with a 0.6-percent decrease to US$97.26, and revenue per available room is forecast to rise 3.0 percent to US$55.13.

Mark Lomanno, president of STR, said the industry’s recovery will be driven by upper-end hotels.

“The luxury chains are going to be by far the best performing of the chain scales in 2010 in terms of RevPAR growth-but of course they had the farthest to come,” He said. “It’s definitely going to be a luxury/upper upscale-led recovery, which is a textbook recovery. That’s important for the industry to regain pricing power across the board.”

Supply is expected to grow 2.0 percent during 2010 and demand is projected to increase 5.7 percent.

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Lomanno said the surprising increases in demand continue to be an upside for hotels, while ADR continues to lag.

“Demand is improving; ADR is not,” Lomanno said. “That means there is an extremely fragile recovery. With occupancy being the driver, that’s the most tenuous of recoveries to have.”

Lomanno said STR’s forecast takes into consideration that it is time for industry operators to raise rates.

“The underlying fundamentals are improving every day,” he said. “We expect fairly rapid ADR movement soon.”

STR projects the industry will end 2011 with increases in all three key metrics. Occupancy is forecast to rise 2.5 percent to 58.1 percent, ADR is expected to be up 3.9 percent to US$101.05, and RevPAR is projected to rise 6.5 percent to US$58.70.

Supply during 2011 is expected to end the year with a 0.6-percent increase, and demand is projected to rise 3.1 percent.