NEW YORK— A lodging fundamental rebound is only three quarters away, said Goldman Sachs in its newly issued Lodging Outlook. The well-known lodging research firm turned bullish on the lodging industry in its latest forecast report, noting that it expects positive RevPAR growth in late 2002 and a serious recovery in 2003. Its aggressive stance is based on its latest analysis of supply/demand trends and historical data, said Steven Kent, lodging analyst for Goldman Sachs. “Our most recent forecast sets the stage for late profit turnaround in 2002,” said Kent during a conference call in which he discussed the report. According to the biannual lodging forecast, a decline in RevPAR growth of 8% for the U.S. lodging industry is expected in 2001, followed by an additional 3.3% decline in 2002. However, RevPAR growth is forecast to turn positive in the fourth quarter of 2002, gaining momentum each quarter throughout 2003 for full year RevPAR growth of 6.7%. In addition, the forecast said demand is expected to outpace supply growth by 320 bp in 2003, an improvement from the unfavorable 660bp spread in 2001. The spread expected in 2003 will likely be the “most favorable demand/supply spread since 1978”, said Kent, with supply expected to be at its lowest growth rate in more than 10 years. Supply growth is anticipated to slow from 2% in 2001 to .6% in 2003, said Goldman Sachs. Another factor that will help contribute to somewhat of a quick recovery is the reduction of fixed costs during these last few months. Kent said with lowered fixed costs and corporate and property level staffs at a minimum, any uptick in demand should have a significant impact on overall operations. “We believe operating leverage will work in the positive direction in 2003,” Kent said. With things looking brighter on the horizon, Kent said he expects investors to once again take to lodging stocks. “History shows that investors buy ahead of trends. They will likely look past the trough and buy lodging shares in anticipation of a recovery,” he said. Goldman Sachs indicated some of the best buys currently out there are: Marriott International, Four Seasons Hotels, Starwood Hotels & Resorts and Fairmont Hotels. Fairmont Hotels was singled out as a solid investment, as it reached Goldman Sachs buy list Nov. 27. Kent said Fairmont, which was just recently spun off from Canadian Pacific, has a strong balance sheet and great potential to grow its portfolio in the United States.
