As the economy recovers and business and consumer spending increases, hotel occupancy levels are expected to inch higher this year. For the first time in nearly four years, the demand for hotel rooms is expected to surpass the demand for new hotel constructions, indicating that a sustainable lodging recovery has begun.
According to a recent PricewaterhouseCoopers U.S. lodging forecast, new construction starts fell from 134,000 rooms in 2008 to 47,000 in 2009. That number dropped to 29,000 during the first quarter of 2010, and will continue to decline throughout this year and into the next.
“Though this remains a challenging year, the hotel sector’s recent increases in lodging demand are brisk, and with improving economic conditions, some operators are ready to refocus on increasing room rates,” stated Scott D. Berman, principal, hospitality and leisure, for PricewaterhouseCoopers.
While rates aren’t expected to increase until 2011, the current construction slowdown is considered a key element in the improved operating performance of existing hotels, which have suffered from declining rates over the past two years. The decline in new hotel builds, combined with the gradual rise in lodging demand is expected to raise occupancy levels from 54.7 percent (2009) to 56.6 percent in 2010 and 58.2 percent in 2011, resulting in moderate revenue per available room (RevPAR) increases of 1.8 percent in 2010 and 6.3 percent in 2011.
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