Lodging market experiences projection downgrade

The lodging market could see a smaller improvement next year.

Property management companies that own lodging properties may experience a slightly depressed market outlook through next year, but the situation will likely still improve, according to a report from PricewaterhouseCoopers.

Overall, the revenue per available room growth should increase by 6.6 percent this year, and drop slightly next year to approximately 5.4 percent. The slowed RevPAR level may hurt the market slightly, but there should still be enough expansion to keep recovery moving, the report explained.

Much of the reason for the issues in the lodging market is the slow economic growth in the American market, as well as a lack of confidence in business. The report explained that the Gross Domestic Product growth should only be 1.6 percent this year, with another 2.9 percent through next year. However, the recent effects of Hurricane Sandy also played a role.

"The lodging recovery is being tested by a period of slower economic growth and recent disruptions related to Superstorm Sandy," said Scott Berman, principal and U.S. industry leader of hospitality & leisure at PwC. "Despite these challenges, the trajectory of the recovery remains positive and we anticipate higher occupancy levels and stronger average daily rate growth in 2013."

Still many positives in the lodging market
While many aspects of the lodging sector may be worrisome, there are still reasons for commercial property managers to be optimistic. The report noted that lodging demand should rise next year, but as much as 2.9 percent. Additionally, supply growth will also rise by one-half percent.

With the aforementioned positive effects to the market, this could help occupancy levels rise to more than 61 percent, making it the highest level in five years, the report explained. The best situation will likely be for the high-end hotels in the market, as they will have the most significant occupancy gains, overall. This would put top hotels into the best situation in the market since before the recession occurred. A large portion of activity in this aspect of the market may be due to businesses once again increasing use of high-end hotel properties.

The report added that the lower-tier hotel situation is not as strong as the higher level because occupancy levels haven't improved significantly. Despite this, there should still be an increase in rates for securing rooms.

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