Hotel Job Resource - PKF News

Normally, this column is supposed to cover the tax changes over the prior year and how they impact the hospitality industry. Last year, we commented about how 2010 was an interesting year but little in the tax field had passed. 2010 was all about health care reform, the change in control of the House and the rise of the tea party. It was a very political and partisan year. If anything, 2011 was worse. Never has so little been accomplished by so many. Brinkmanship was the key word for 2011. It will be known more for what did not occur rather than what did. It is not unusual for partisan politics to take center stage in an election year. While 2011 was not, the race for the Presidency and control of the House and Senate began before all the winners from 2010 were known.

The U.S. lodging industry recovery may have begun in 2010, but it wasn’t until 2011 that the improved prosperity was shared by nearly all hotels in the country. In 2011, 80.5 percent of the properties that participated in the PKF Hospitality Research, LLC (PKF-HR) Trends® in the Hotel Industry annual survey enjoyed an increase in total revenue, while nearly three-quarters (72.3%) of the participants achieved growth in profits.

From 2008 and 2009, the average U.S. hotel suffered a 13.2 percent decline in occupancy along with a 5.9 percent drop in average daily rate (ADR). During this period, hotel managers were challenged to find tactics that maximized revenue for their hotels. On the sales side, adjusting room rates and experimenting with distribution channels garnered the most attention. However, back in the accounting offices of U.S. hotels, decisions had to be made regarding the offering of credit to potential guests.

With nearly two years of momentum behind it, the U.S. lodging industry’s fundamentals are projected to continue to be positive through 2014. According to the March 2012 edition of Hotel Horizons®, PKF Hospitality Research, LLC (PKF-HR) forecasts that rooms revenue (RevPAR) for U.S. hotels will rise 5.8 percent in 2012, the result of a 1.6 percent increase in occupancy and a 4.1 percent gain in average daily room rates (ADR).

Over the years, PKF Hospitality Research (PKF-HR) has analyzed the cyclical nature of lodging industry. Most recently, a lot of attention has been paid to the pace of recovery from the depths of the industry recession in 2009. Typical of historical recovery sequences, lodging demand and occupancy levels bounced back strongly in 2010, followed by real increases in average daily room rates (ADR) in 2011.

According to Smith Travel Research, group demand (measured as a percent of total demand) began to grow year-over-year in March of 2010. Since then, the group occupancy rate has steadily increased, but has yet to reach the pre-recession levels observed in 2007 and 2008.

Coming out of lodging industry recessions, we have historically observed fairly significant increases in hotel operating expenses. Since the initial revenue recovery is typically driven by occupancy, variable expenses naturally rise with the increased volume of rooms occupied and guests served. In addition, hotel managers desire to reinstate the services and amenities that were discontinued during the downturn contributes to above-average expense growth.

According to a new study released by PKF Consulting USA (PKFC), hotel spas experienced deeper declines in revenues and profits than did hotels, as measured by RevPAR, in 2008 and 2009 and also are taking longer to recover.

In 2009, all segments of the lodging industry struggled. However, the combined impact of the economic recession and the demonizing of corporate meetings, resulted in an even more dramatic fall off in performance for conference centers.

While many hoteliers are feeling angst and uncertainty caused by intimidating macroeconomic conditions, PKF Hospitality Research (PKF-HR) is assertively forecasting the continued recovery of the U.S. lodging industry. How well you do in 2012, however, will vary depending upon the price of your room and where you are located. According to the recently released December 2011 edition of Hotel Horizons®, PKF-HR forecasts that rooms revenue (RevPAR) for U.S. hotels will rise 8.1 percent in 2011, and increase another 6.1 percent in 2012.