Mar
21

PKF: U.S. Hotel Overbuilding Is Not A Concern (Yet!)

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According to the recently released March 2014 edition of PKF Hospitality Research, LLC’s (PKF-HR) Hotel Horizons® forecast report, the U.S. hotel occupancy rate will finally recover to pre-recession levels in 2014. Given this lofty level of performance, many industry participants are starting to worry about an oversupply of new lodging units may be in the future. The demand for lodging accommodations has been at an all-time high for the past two years, so could elevated construction levels be far behind?

“Anyone that was around in the 1980s and 1990s remembers the dramatic negative impact overdevelopment can have on the lodging industry,” said R. Mark Woodworth, president of PKF-HR. “Fortunately, we see a different scenario evolving during the current property cycle. According to Smith Travel Research, the long-run average annual change in supply has been 2.0 percent. We do not see the national annual supply growth exceeding that level until 2017.”

Not only are the forecast percent changes in supply lower than historical averages, but so are the actual counts of new rooms entering the market. “During past expansions, we have seen three to five consecutive years of 100,000 or more net new hotel rooms entering the market. Our current supply forecasts for the next three years are well below that threshold,” Woodworth said.

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