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Hotel industry predicts best results in 6 years

The economic upturn is being felt by the hotel industry, with occupancy levels up and a bright outlook for profits, reports PwC.

The key indicator of revenue per available room should increase by nearly 6% this year and over 6% in 2014. There are a few reasons for this: first, there are hardly any new hotels rooms on the supply side and second, both leisure and business travel is increasing. While this is good news for the hotel industry, it does not automatically mean price increases for business travelers as this increased profit is a result of increased occupancy.

The PwC report stated that despite forecasted economic growth, there are macroeconomic challenges ahead. It highlighted the effect of Federal government cuts and a tightening of the money supply as possible threats at this level.

From the perspective of the hotel industry, there are a number of positive factors: household wealth is on average increasing, at the same time as the corresponding household debt is decreasing – resulting in more cash for leisure spending. There is also a palpable increase in consumer confidence at the same time as overall employment is gradually improving.

High-end Gains

The leader of hospitality and leisure at PwC, Scott Berman, has highlighted that the top end of the market has seen improvement. He said: “Hotels in higher-priced segments are achieving occupancy levels above the prior peak, and looking ahead, the foundation is in place for solid rate gains as travel demand grows and hotel operators adjust strategies accordingly.”

Looking at his words carefully, we could be in for some rises for business travelers at this end of the market. The PwC report quantified the increase in demand for hotel rooms at around 2.2 percent, while suggesting supply will increase at around just 0.8 percent. This should raise occupancy rates to 62.2 percent, the highest level since the financial crisis began.

The raw statistics are a bit too general, the report points out. Hotels in urban areas, for example – most frequented by business travelers – will be in most demand and have limited scope to increase supply. They may see their revenue per available room jump more than the predicted 5.9 % and consequently rate rises may hit business travelers disproportionately.

Events on the rise

PwC also expects to see an increase in the number of business related events and conferences over the next year. This is also not a universal trend, with smaller and medium sized companies expanding their event bookings more quickly than larger organizations.

All this means for business travelers and travel departments that they may find it slightly harder to get the best room and rates will be, most likely, a little higher. This should really come as no surprise in a period such as that forecast but will make the task of corporate travel departments even more challenging.

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