Just How Fast Is Hotel Performance Improving?

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There's a very healthy and positive debate among the three alphabet companies—STR, PwC and PKF—that keep track of hotel industry performance. The question is exactly how fast the lodging industry is recovering, at least judged by forecasted 2011 growth in RevPAR.

All three firms recently revised their outlooks and unveiled them at this week's ALIS Summer Summit in Dallas. The results: PKF says RevPAR will improve by 6.9% this year; PwC pegs the increase at 7.6%; while the usually conservative STR says this key industry measure will rise a very healthy 8.0% this year.

Of course, while these rosy forecasts are music to the ears of hotel owners, developers, lenders and operators, there is one disturbing trend buried in the data: Despite record demand for hotel rooms and low levels of new hotel openings, average rates are barely inching up. But even here there's some good news.

STR's Senior Vice President Jan Freitag said more transient rooms will be sold in 2011 than in the pre-recession high-water-mark year of 2007. And although rates remain far below that peak year, hoteliers can change them quickly if they have the will to do so. Group demand is nearly back to 2007 levels, too, but rates will remain low until customer-friendly contracts signed during the downturn burn off. Of course, hoteliers still need to muster the courage to negotiate tougher deals as meeting clients look for future space.

Dr. Jack Corgel, Cornell University professor and senior advisor to PKF Hospitality Research, had an optimistic take on the state of leisure business. He says leisure business has held up, and should continue to do so, because while unemployment among unskilled workers is around 25%, it's only 4% among consumers with college degrees, a group that tends to travel a lot more for pleasure.

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