Feb
05

Low Oil Prices: Upside Potential for the Lodging Industry

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car-save-gas-lgFor the past four years, there has been much to be happy about for most industry participants as the U.S. lodging industry recovered from the troughs of the Great Recession.  As we enter the initial months of the New Year, there are many reasons to believe that 2015 will be another great year for most industry participants.  We will likely see a record occupancy level achieved in the U.S. this year and conditions in the vast majority of markets will support aggressive pricing strategies.  This should lead to the 5th consecutive year of significant room rate increases for most and contribute to another year of double-digit profit growth for the average U.S. hotel.
We at PKF Hospitality Research (“PKF-HR”), a CBRE Company, have been calling for a strong 2015 since the cows came home.  This has been predicated, in part, on the slow, but relatively steady, upward trajectory of the domestic economy.  Particularly important to hotels has been the consistent level of job growth over the past six months, and most economists expect greater levels of Gross Domestic Product (“GDP”) expansion this year and next.  A new wildcard has surfaced of late: a rapid decline in the price of oil and, as a result, a significant drop in the cost of gas at the pump.  Assuming that these conditions are sustained, what does this recent shift portend for U.S. hoteliers in the months ahead?  We start our answer with a discussion of the contributing factors behind the lower price of oil.
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