Economic Forecasts and Predicitons Point Towards Overall Improvements in 2014

Source: Alan Reay Atlas Hospitality Group As we have wrapped up 2013, it is a good time to look at the general consensus among market experts for next year on both the hotel front and for the overall economy. In reviewing numerous economic forecasts and predictions, it appears that the majority favors an overall improvement in 2014. For the hotel industry, we see predictions of increased rate, occupancy and Rev PAR. Some of the positive outlooks include:

• TravelClick – “Outlook for 2014 is improving, with group rates for the month of October outpacing the same period last year by almost 50%.” For 2014 overall, committed occupancy is up 7.4% over the same time last year. ADR is up 3%.
• Bjorn Hanson (divisional dean for the Preston Robert Tisch Center for Hospitality) – “The emerging seller outlook for 2014 is for corporate contract rates to increase by a national average of 6.5 to 7.5% or more.”
• PWC – 6.2% Rev PAR growth, mostly through increased ADR
• PKF – Double-digit, unit level NOI increases through 2015, a trend started in 2011.
• STR – 6% Rev PAR growth

Atlas has found Kiplinger to be one of the most reliable predictors of economic forecasts. Some of their key macroeconomic assumptions for 2014 are:

• GDP – Momentum is slowly building, growth to hit 2.6%
• Interest Rates – Short-term rates to stay low through the year
• Business Spending – 4.5% gain in 2014, businesses will continue hoarding cash
• Housing Sales – Existing home sales will be up 4%, new homes up 16%
• Trade Deficit – Will narrow about 5% next year, oil imports will decline
• Unemployment – Will fluctuate between 6.9% and 7.2% through mid-2014
• Inflation – Will tick up slightly to 2%
• Energy – Oil will trade at $90 to $95 through the year
• Retail Sales – Will growth 5.2% to 5.7%

As for how California hotel owners will be impacted, it is safe to say that we will continue to see positive Rev PAR growth and increased profitability through 2014. PKF's Mark Woodworth said, “We have not seen such a sustained period of profit improvement since the inflationary days of the 1970's.” We expect to see higher increases in the markets that have lagged, such as the Inland Empire and Central California, as new housing construction picks up and businesses expand.