STR’s revised forecast reflects demand spike
 
STR’s revised forecast reflects demand spike
23 NOVEMBER 2010 9:30 AM

The hotel benchmarking company changes its outlook based on increased occupancy and its president is increasingly optimistic about the opportunity for rate growth in 2011.

HENDERSONVILLE, Tennessee—STR predicts the United States hotel industry’s performance in 2010 will exceed its original forecast, but the hotel benchmarking company is standing firm on expectations for the industry in 2011.

Mark Lomanno
President
STR

In its latest revised forecast, STR qualifies 2010 as a successful year because there are indications that a recovery is in the offing, according to Mark V. Lomanno, STR’s president. The biggest reason Lomanno shies away from saying a recovery is in full swing? The lack of growth in average daily rate.

“We haven’t really changed the forecast a lot,” Lomanno said. “So far, anything positive in the lodging industry is all generated by demand. The ADR numbers haven’t grown and that’s a good reason to remain a little less optimistic. However, we think there is an opportunity for the industry to start hitting its stride in 2011.”

STR’s latest 2010 forecast is a marked improvement for the industry from the company’s first forecast of 2010, which was released in January:

  Previous 2010 forecast  Updated 2010 forecast  20-year average
Supply +1.8% +2.0% +1.9%
Demand +1.8% +7.4% +1.2%
Occupancy  0.0% +5.3% (US57.4%) -0.8%
ADR -3.2% -0.1% (US$97.92) +2.8%
RevPAR -3.2% +5.4% (US$56.23) +2.1%


“Demand has come back faster and swifter than we anticipated,” Lomanno said. “That’s a good foundation for the industry to build upon; however, hotel operators must take advantage of the pricing power that is available because of the increase in demand.”

Lomanno said a lot will be riding on how hoteliers price their products during November and December.

“I want to see what those months are like for ADR,” Lomanno said. “ADR is still surprisingly sluggish. We’re anticipating an accelerating rate for ADR growth, but we haven’t seen it yet. There’s a lot of chatter in the industry that they’re going to do this, but the actual data doesn’t reflect any of that.

“We’re getting increasingly optimistic,” he continued. “Ultimately the strength in demand, which is stronger than anyone thought, has to affect rates.”

With that in mind, STR also slightly adjusted its 2011 forecast:

  • Supply will increase 0.9%;
  • Demand will rise 2.5%;
  • Occupancy will increase 1.6% to a total of 58.3%;
  • ADR will jump 3.9% to US$101.73; and
  • RevPAR will increase 5.5% to US$59.35.

If that forecast holds true, it will mark the first time since 2008 (US$107.27) that the nationwide ADR will top the one-hundred-dollar barrier.

Lomanno said the rate of recovery within the chain-scale segments continues to indicate that the industry’s recovery will be a top-down rebound, starting with the luxury segment.

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