Supply Growth to Stifle U.S. RevPAR in 2010

RevPAR declines in the U.S. are expected to continue into the convention season according to STR’s revised monthly forecast. The company also revised its forecasts for year-end 2009 and 2010.

STR’s forecast projects 2009 occupancy to be down 8.4% to 55.4% and ADR to decline 9.7% to US$96.43. It projects RevPAR to end 2009 with a 17.1% decrease to US$53.41. Supply in 2009 is projected to increase 3%, while demand is expected to end the year down 5.5%.

Looking at the third and fourth quarters of 2009, decreases are expected to slow in occupancy and demand percent change when compared with the later part of 2008.

November is the only month with forecast demand growth in year-over-year comparisons.

“Our slight downward revision in the 2010 U.S. lodging RevPAR forecast is due to the higher supply growth number we now expect next year,” said Mark Lomanno, president of STR. “That upward adjustment is the result of the significant decline in the number of hotel rooms that are actually closing their doors in this economic cycle. Our previous assumptions for room closings were substantially higher than we now expect.”

The outlook for 2010 looks slightly better than 2009, but the industry is expected to end 2010 with decreases in all three key metrics. Occupancy is projected to end the year with a 0.6% decrease at 55.1%, ADR is forecasted to decline 3.4% to US$93.16, and RevPAR is expected fall 4.0% to US$51.26.

Supply and demand in 2010 are both projected to end the year with positive growth. Supply is predicted to be up 1.8% and demand is expected to increase 1.3%.

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