Company Press Release
May 9, 2000
NEW YORK, NY -- PricewaterhouseCoopers' Hospitality & Leisure Practice predicts the lodging industry will experience
RevPAR (revenue per available room) growth of 2.8 percent in 2001, a 1.1 percent drop from the 3.9 percent RevPAR
increase expected this year and the lowest RevPAR growth since 1992.
Two key factors will diminish RevPAR growth: A slowing in the U.S. economy's GDP growth, forecast by Marcroeconomic
Advisors to decrease from 4.4 percent this year to 2.8 percent next year; and the opening of a record amount of
new supply, with new construction starts reaching a record high in 1998 of 161,900 rooms and 148,200 rooms in 1999.
The previous record was in 1985, when construction starts reached 155,800. In 1997, construction starts were 155,100.
``With the strength of the U.S. economy this year, the lodging industry will witness a demand increase of 3.6 percent.
This will mitigate some of the effects of the rapid new supply in the market,''said Bjorn Hanson, Ph.D global industry
leader of PricewaterhouseCoopers Hospitality & Leisure Practice. ``However as the economy settles into a more
sustainable pace in 2001 and 2002, the lodging industry will face slower demand and slower RevPAR growth.''
The year 2001 will be the RevPAR trough of this cycle. In 2002, PricewaterhouseCoopers predicts RevPAR growth will
rebound to 3.5 percent.
PricewaterhouseCoopers forecasts rely on extensive lodging data collection, empirical studies and solid econometric
models to support all positions and conclusions. In PricewaterhouseCoopers econometric model, hotel room starts
are modeled as a stock adjustment process. The timing of groundbreaking is closely related to economic influences
(such as the availability of capital) and therefore can be modeled reliably. Room starts are transformed into completions
through an algorithm based on a Census Bureau survey of the rate of hotel construction put in place.
PricewaterhouseCoopers Hospitality and Leisure Group-with its staff of Ph.D. economists and specialized consultants-has
established itself as the industry's leader in providing reliable lodging forecasts that offer true industry-wide
samples based on proven econometric models. The group predicted every industry turning point in the last ten years,
usually two years in advance of each market move.
In July 1991, PricewaterhouseCoopers predicted a return to profitability for the industry in 1993, and average
daily room rates surpassing inflation. In April 1996, PricewaterhouseCoopers issued an early alert that there would
be an occupancy decline in 1997. In October 1996, the firm predicted occupancies would decline in 1997. And in
September 1997, PricewaterhouseCoopers said room starts would decline in 1998.
The firm's research models have recently been refined and enhanced to improve the estimation of future room starts,
to enable more precise estimation of the interactions between lodging statistics and the macroeconomy, and to provide
reliable estimates of future lodging statistics of the U.S. at the industry segment, the regional, and the local
market level.
PricewaterhouseCoopers Hospitality and Leisure Group provides services including management, technology, human
resources and financial consulting in North America, Europe, the Middle East and Africa. The group recently formed
a partnership with Smith Travel Research.
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PricewaterhouseCoopers (www.pwcglobal.com) is the world's leading professional services organization. Drawing on
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PricewaterhouseCoopers refers to the US firm of PricewaterhouseCoopers LLP and other members of the worldwide PricewaterhouseCoopers
organization.
Note to Editors: The name PricewaterhouseCoopers is one word, with upper case P and upper case C and all the other
letters in lower case.
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Contact:
Wendy Determan
PricewaterhouseCoopers
212/596-5079
wendy.j.determan@us.pwcglobal.com