LODGING FORECAST

2012

Thefirst halfof

2011 boosted confidence as the lodging sector continued to ben- efit froma recovery in travel that has beenunderway for the past two years. Asweproceeded through the third quarter, there were signs that strength in the lodging sector had begun to level out. For example, at the start of the summer, lodg- ing operators noted continued transient and group bookings, and preliminary results for the summer pointed toward strong levels ofdemandand growth. But recent devel- opments—including incoming data reflecting a faltering economy, the evolving European sovereigndebt cri- sis, U.S. debt negotiations, and dete- riorating financial conditions—have affected the outlook for the lodging sector, reducing expectations for RevPAR growth in the remainder of 2011 and into 2012. Aspects of travel that are closely

Demand for 2012

is expected to continue to grow but barely

linked to the economic cycle are expected to pull back for the remainder of 2011 and for 2012. Some trips that would have occurred in a more vibrant environment will be shortened or perhaps canceled. At the same time, travel driven by key busi- ness initiatives along with stronger economic sectors will con- tinue to grow. The balance leans in favor of overall continued growth, but this situation could change very rapidly if the global economy falters even further.

48 pcmaconvene November 2011

reach levels equal to 2008. ADRwill recover only slightly and not return to peak levels until 2014.

The composition of the lodging demand during the first

half of 2011 showed that activity in the group segment has con- tinued to trail the recovery of transient demand, although the gap is slowly closing. Transient demand and occupancy in 2011 has almost returned to the peak levels of 2007, and will continue to grow in 2012, albeit at a slower pace. However,ADRinthis seg- ment continues to trail peak performance by 10 to 15 percent, and is not expected to get back to those past levels until after 2012. In fact,wecontinue to see a new style of transient customer who is leading the market and will continue to become more visible in 2012; this is a customerwhois look- ing for a very specific price/value proposition. Those hoteliers that can be resistant to price decreases in 2012

as a strategy to drive occupancy and instead can focus on value increases should

see positive results to their bottom line. The group segment continued to strengthen during 2011, but upper-tier hotels still have ground to cover to return to a mix of business that will help opti-

mize profitability. Demand for 2012 is expected to continue to grow but barely reach levels equal to 2008. ADR will recover only slightly, and most likely will not return to peak levels until continued on page 54

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