The news just keeps getting worse for the hotel industry.
PKF Hospitality Research and Smith Travel Research released increasingly pessimistic forecasts for the industry this week, with PKF estimating revenue per available room (RevPAR) would drop 13.7% this year.
Previously, PKF estimated RevPAR would be down 9.8%. The downward revision, PKF said, is the result of a 7.8% falloff in occupancy and a sharp drop in average daily rates (ADR) for the year.
"Of most concern are declining room rates," Woodworth said. "The 6.4% decrease in ADR forecast for 2009 is the largest annual decline observed by PKF-HR since the firm began compiling data in 1932. When revenue contraction is heavily influenced by declines in ADR, the downward impact on profit is amplified."
PKF is forecasting that the average U.S. hotel will experience a 30% decline in profit during 2009.
STR predicts RevPAR will be down 5.8%, but CEO Randy Smith admitted his projections "are a shot in the dark."
"Demand is still falling while supply is increasing rapidly," he said. "Rate discipline, for all intents and purposes, has now gone out the window."
The good news is that both Woodworth and Smith think the most severe declines will come in the current quarter.
Smith said he expects rates to decline at least through the summer, but thinks this summer "could actually be OK" if gas prices remain low and the stock market stabilizes.
"I do think we should see improvement as we get on throughout the year," Smith said.
Woodworth said he expects "fading revenues will persist throughout 2009 and 2010. However, the magnitude of RevPAR declines will taper off to single digits beginning in in the fourth quarter of 2009."
"Continuing declines will further erode profits, but the leaching will become less painful as we move through this deep and extended trough in the business cycle," Woodworth said.