HOTELS

Derek Gale

Recession Worries? Ha! U.S. Lodging Forecasts For 2008 Upbeat
November 20, 2007

The U.S. lodging industry recorded its best year ever in 2006, posting pretax profits of $26.6 billion, according to the American Hotel & Lodging Association Lodging Industry Profile. And now we look to be coming toward the close of yet another record-setting year in the hotel business.

But with rumblings of a potential decline in the United States’ economy, PKF Hospitality Research recently released a special econometric analysis that measures the impact a hypothetical recession would have on U.S. hotels.

The analysis found that if a recession were to occur in the United States during 2008 - 2009, it would result in a 6.1% decline in room revenue for the U.S. lodging industry through 2010. 

To that I say, “Recession worries? Ha.” Despite an uncertain economy, 75% of Americans plan to spend at least as much on leisure travel in the coming year as they did in the past year, according to another recent survey commissioned by Deloitte. 

And even PKF is hedging its research: “We do not anticipate a near-term economic recession, but some industry participants are beginning to worry since times have been so good for so long,” says Mark Woodworth, president of PKF Hospitality Research. 

As for the ever-present supply versus demand question, “Many people are worrying about the record volume of new hotel projects in the development pipeline,” Woodworth notes. “However, given the current costs of construction, lending environment and investor expectations, we believe the growth in demand for hotel accommodations will absorb most of the new supply.”

On top of that, American Express’ Global Business Travel Forecast predicts demand will continue to outpace supply in 2008, translating into rate growth in all segments, with double-digit increases predicted for high-demand markets.

And finally, travel spending by domestic and international visitors to the United States in 2008 is forecast to increase 5.2%, according to the Travel Industry Association forecast. 

So again I say, “Recession? Ha. Laissez le bon temps roulette!”

Posted by Derek Gale on November 20, 2007 | Comments (1)