Research firm forecasts hotel revenue increase, profit drop

By Jerry Limone

U.S. hotels will experience a 1.7% increase in revenue per available room this year, but profit will fall 1.4%, according to PKF Hospitality Research’s forecast based on a first-quarter analysis.

The industry is in the midst of a significant demand spike, suggesting a return of pent-up travel that did not occur last year because of budget constraints, said R. Mark Woodworth, PKF’s president. Based on its first-quarter study of the 50 largest U.S. hotel markets, PKF forecasts that U.S. hotel occupancy will rise 3.4% in 2010.

However, profits won’t rise because prices aren’t increasing. PKF expects average daily rates to decline 1.6% in 2010.

Also, increased demand is incurring additional operating costs, such as housekeeping staff, laundry, guest supplies and energy consumption.

"Unfortunately, the composition of hotel revenue growth we forecast for 2010 is not very profitable," Woodworth said. "This is consistent with the pattern we have seen coming out of past industry recessions. Price increases lag demand growth. Greater profits lag increases in revenue."

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