Economic Momentum for Hotel Occupancy

Hotels & Resorts

Looking back, 2013 was a decent year for economic growth—the stock market saw record highs, unemployment crept down and the U.S. Federal Reserve started drawing down its quantitative easing program for the first time since 2008. In the midst of this growth, the hotel industry also appears to have had a solid year, and the trend doesn’t seem to be ending. Here is a quick look at where things are now and what to expect this year.

According to a recent year-end report by Smith Travel Research (STR), the hotel industry posted gains in all three of its performance metrics in 2013. U.S. hotel occupancy increased 1.5 percent to 1.1 billion room nights sold, an overall occupancy rate of 62.3 percent. Among the top 25 markets, Denver posted the top number, increasing 5.7 percent to 70.8 percent occupancy.

Accompanying the increase in occupancy was a jump in the Adjusted Daily Rate (ADR), which measures the average cost of a hotel room per night. The ADR in the United States went up by 3.9 percent to $110.35, with Oahu Island in Hawaii posting the largest increase, jumping 13.9 percent to $209.01. Additionally, no ADR decreases were reported. When taken together with occupancy rates, the numbers suggest that strong growth in demand led to an increase in room rates across the board.

Unfortunately for planners, the trend appears to be accelerating this year. According to financial giant PricewaterhouseCoopers’ (PwC) 2014 lodging forecast, occupancy rates are set to increase an additional 1.4 percent to 63.2 percent, the highest level since 2006. Additionally, ADR is expected to swell 4.5 percent to roughly $115.31.

Further compounding things, the occupancy at luxury properties is expected to jump to 75 percent, with upscale properties climbing to 72.7 percent. The bottom line—that lavish incentive program you booked in Kauai or Orlando will most likely need to be booked further out and cost you a few pennies more.

“In the top 25 markets, suburban locations outside the central business district may be better options for the price-sensitive consumer,” says Scott Berman, principal and industry leader for hospitality and leisure at PwC. “If planners are looking for ‘best deals,’ they are likely to be found outside the top 25 U.S. markets in secondary and tertiary markets. Otherwise, expect to pay more for room accommodations in 2014.”;