Hotels Preview 2013: Hotels By Danny King / December 31, 2012 Share 1 -- The message regarding the 2013 forecast for the U.S. lodging industry from PKF Hospitality Research President Mark Woodworth was stark and clear: Hedge your bets. "The recovery is near," Woodworth said during a presentation at October's Lodging Conference in Phoenix. "Or is that a cliff ahead?" Prospects for the U.S. lodging industry are getting progressively cloudier as questions about the so-called fiscal cliff and its tax ramifications, especially for wealthier U.S. citizens, continue to affect the spending attitudes among the most active business and leisure travelers. Questions about the economy and a recovery that appears to be continuing, but at a fairly tepid pace, are offsetting the positive effect for hoteliers of limited growth in room supply. Most analysts say the domestic supply of about 4.9 million hotel rooms will increase by less than 1% next year. That would prevent the double-whammy of aggressive hotel construction and the ensuing economic downturn that struck the U.S. lodging industry five years ago. Most recently, PricewaterhouseCoopers cut its forecast for 2013 revenue per available room (RevPAR) growth to 5.4% from 5.6%, setting it at $65.06, which is still below the 2007 peak. Luxury hotels will see the biggest gains, with budget properties growing the slowest, and all of the other middle sectors falling in line. Additionally, hoteliers will faced the twin challenges of more government scrutiny of both resort fees, which have enabled operators to collect more revenue without overtly hiking room rates, and of public-sector travel spending. "Unfortunately, $14 muffins and junkets to Las Vegas have left a bad aftertaste in legislators' mouths, and the headlines often paint government travel as frivolous and wasteful," Smith Travel Research Senior Vice President Jan Freitag wrote in a Dec. 10 blog post. "Travel is an easy scapegoat and likely will be reduced further." The good news, Pricewaterhouse predicted, is that occupancy next year will increase for the fourth straight year, to 61.9%, the highest level since 2007. "Despite slow economic growth, transient business travel has continued to gradually improve from recession-related lows," Pricewaterhouse reported. "This points to some incremental growth in leisure travel demand in 2013, though elevated levels of unemployment and underemployment weigh on household spending choices." Either way, many hoteliers have reached agreements to either reflag existing properties or build new ones in order to position themselves to benefit from what they hope will be a continued increase in demand. The Pricewaterhouse forecasts that owners of both existing and proposed luxury and upper-upscale hotels appear to have the easiest time getting the necessary financing to either break ground or commence the millions of dollars of improvements associated with a rebranded property. Owners and operators of midscale and budget hotels, however, remain challenged in that area. In New York, the tallest hotel-only building in the most lucrative U.S. hotel market will open in a 68-story midtown Manhattan building with a 378-room Courtyard by Marriott and a 261-room Residence Inn. Meanwhile, SBE Entertainment Group will open the city's first SLS-branded hotel in Manhattan's midtown south district. Elsewhere on the East Coast, the Philadelphia Navy Yard's first hotel, a Courtyard by Marriott, will open for business, while that city will become home to a 246-suite Home2Suites, the world's largest under that Hilton badge. Portland, Maine's Eastland Park Hotel, which was built in 1927, will be reflagged under Starwood Hotels & Resorts' Westin brand next year. Atlanta's Hotel Midtown will reopen as the Hyatt Atlanta Midtown after the 191-room hotel undergoes a $21 million renovation. And Miami's 700-room Doral Hotel & Country Club, which was acquired by the Trump Organization earlier this year, will complete a $150 million renovation. In Chicago, the first property under Richard Branson's Virgin Hotels brand will open in the city's Old Dearborn Bank Building as a 250-room property. The Windy City will also be getting its first hotel under Commune Hotels & Resorts' Thompson Hotels brand. In Las Vegas, Caesars Entertainment will open Las Vegas' $500 million Linq district, which will include 326,000 square feet of retail and entertainment space and the world's tallest Ferris wheel. The company will also reopen an upgraded, yet-to-be-named hotel at the site of the Bill's Gamblin' Hall & Saloon on the Strip. In California, Legoland will open its first U.S. hotel, a 250-room property, at its Legoland California park just north of San Diego. Hyatt's Andaz badge will add a 309-key property in Maui's Wailea beach resort. Finally, InterContinental Hotels Group says it will debut its wellness-inspired Even midscale brand sometime next year, though no debut city has been announced. An Even has already been slated to open in New York in 2014. As for consumer trends, resorts that can offer an unusual culinary experience, either through a well-regarded on-site dining option or an opportunity for guests to learn about the culinary arts directly, will gain popularity. For hotel guests, the preferred mode of service will continue to bifurcate: Travelers will gravitate further to either an all-self-service proposition typified by hotels such as the U.K.-based Yotel and the use of self-service kiosks at a growing number of select-service properties, or more guests will move toward an ultrapampering experience provided by operators such as Four Seasons and Marriott's Ritz-Carlton badge. Internationally, the lodging industry in countries such as Turkey and Croatia will benefit from more hotel openings by international chains and a jump in resort-seekers from Russia, respectively. Follow Danny King on Twitter @dktravelweekly.