PricewaterhouseCoopers Reports Gasoline Prices Negatively Affecting U.S. Lodging
JUNE 6, 2007. According to PricewaterhouseCoopers, increases in gasoline prices will negatively impact U.S. lodging demand between Memorial Day and Labor Day in 2007 by an average of 4,000 rooms per night assuming gasoline prices had remained at 2006 levels, or 25,000 rooms per night assuming gasoline prices had remained at 2005 levels.
PricewaterhouseCoopers' outlook is based on predicted gasoline prices with a high approaching $3.10 per gallon and an average around $3.00 per gallon through the busy summer months, declining towards the end of the year.
'Gasoline prices affect lodging demand, and the media attention during the period of travel planning is increasing consumer awareness of the issue, which may cause an even greater impact,' says Bjorn Hanson, PhD, and principal, Hospitality and Leisure practice, PricewaterhouseCoopers.
According to PricewaterhouseCoopers, if gasoline prices increase by extra 10 percent, or approximately 30 cents per gallon as is expected, U.S. lodging demand will be reduced by an average of 6,000 room nights during 2007, or 0.13 occupancy points. Declines will be concentrated during the second, third and fourth quarters of the year with 4,000, 8,000 and 12,000 fewer occupied rooms per quarter, respectively. Therefore, from Memorial Day through Labor Day, an additional 10 percent, or approximately 30 cents per barrel, increase in the price of gasoline will result in approximately 8,000 fewer occupied rooms per night, or 0.2 occupancy points. Based on PricewaterhouseCoopers research, if gasoline prices were to remain at their 2006 average levels of around $2.57 per gallon through 2007, lodging demand would be higher by an average of 4,000 occupied rooms per night, or 0.1 occupancy points.
According to PricewaterhouseCoopers' research, gasoline prices had a significant effect on lodging demand during 2006. In particular, if gasoline prices had remained at fourth quarter 2005 levels through 2006, U.S. lodging demand would have added a cumulative of over 20,000 occupied rooms in 2006, or an additional 0.4 occupancy points.
PricewaterhouseCoopers' research also indicates that while the Luxury and Upper Upscale segments' room demand was not affected by gasoline price increases in a statistically significant way, the Upscale, Midscale without food and beverage, and Economy segments experienced statistically significant declines of around 3,000 cumulative occupied rooms, respectively, with the rest of the declines concentrated in the independents segment.
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