LOS ANGELES— While the lenders and borrowers in the industry clearly provided their own view on the current state of the lodging industry, the bullish outlook was reinforced by industry analysts Mark Woodworth and Randy Smith at the recent Meet The Money conference here.
During “How Good Will It Get— U.S. Lodging Industry Outlook,” Mark Woodworth, executive vp, PKF Consulting, noted, “The post-9/11 recovery continues to solidify. There’s a pervasive mood of happiness in the industry,” he said.
During his session, “Lodging Supply and Demand— Is This As Good As It Gets?” Randy Smith, CEO of Smith Travel Research, noted, “For the next several years things will be exceptionally good,” he said.
Woodworth explained what he thought was driving the mood in the market.
“A year ago, occupancy was in the recovery mode, now RevPAR and ADR are on the rise,” he said.
Smith was in agreement with that sentiment. “Room rates will start increasing at a faster rate,” he said.
Woodworth later elaborated, “Income transfer has impacted rate growth. We see attractive rate growth through 2007. Full-service RevPAR gains will be driven by increased room rates. There is robust growth ahead,” he said.
Smith further predicted a 1.2% increase in supply and 4% increase in demand for 2005, and ADR is expected to be close to $90, with RevPAR up about 7.1%.
His analysis further broke down the numbers by segment, which offered a few anomalies.
“The economy segment is a surprise running at 51.7%, while luxury hotels are at an average rate of $254. Midscale with food & beverage and without are at $74 and $73, respectively,” said Smith.
“From the local corner street market assessments, the recovery has moved across the majority of markets,” said Woodworth.
“The year-to-year change in profitability has been awful, there will be significant growth going forward,” he said, although he cautioned, “asset values will not increase like they did in the ‘90’s.”
Smith for his part noted that supply will be increasing through new-build projects.
“Construction is starting to pick up, properties will open over the next 18 months,” he said, noting that in 2004 companies opened the fewest number of rooms in this industry. He added “construction costs are a serious issue for this industry.”
