PWC Forecasts ADR Gains Will Slow
JUNE 8, 2007. PricewaterhouseCoopers forecasts that U.S. lodging industry average daily rate (ADR) increases will decelerate in 2007 as room supply additions accelerate, demand becomes constrained by the less robust U.S. economy and consumers respond to the cumulative rate increases. According to PricewaterhouseCoopers, U.S. ADR is expected to increase in 2007 by 5.9 percent, still the highest rate since 1996 with the exception of the 7.1 percent increase in 2006. The luxury segment will achieve the highest rate increase at 7.4 percent, while the mid-scale with food and beverage and economy segments will achieve rate increases of 4.3 percent.
"It is rare that rate growth can slow by 17 percent and still be great news," said Bjorn Hanson, Ph.D., principal, Hospitality and Leisure practice, PricewaterhouseCoopers. "We expect rates will increase in 2007 by the second highest percent in 10 years and 2.8 times the rate of inflation."
A long period of sustainable gains in room demand with room supply additions well below historical averages has allowed the industry to achieve robust room rate increases, according to PricewaterhouseCoopers. All chain scale segments experienced acceleration in ADR gains during the last four years with the exception of the luxury segment where the cumulative ADR gains from the second quarter of 1997 through the second quarter of 2001 stood at 28.8 percent compared to a 26.7 percent growth during the period from 2002 through 2006. The upscale segment experienced a cumulative gain of 23.1 percent during the period from 2002 to 2006, 8.3 percentage points higher than the gains during the period leading to September 11, and the highest difference among all segments.
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