By Deena Beasley
LOS ANGELES (Reuters) - As new hotels open and demand grows more moderately, the U.S. lodging sector will stabilize in 2007, although a healthy business economy should still underpin expansion, consulting firm Ernst & Young said in a report released on Monday.
The supply of U.S. hotel rooms is expected to increase by 2.5 percent this year, compared with 1.8 percent in 2006, according to Lodging Econometrics.
"The nation's lodging markets, most of which are past their post-9/11 recovery phase, are absorbing the additional supply. Nonetheless, the economic conditions in 2007 may lead to more moderate lodging demand," Mike Straneva, head of Ernst & Young's real estate transactions group, said in the report released at the beginning of the Reuters Hotels and Casinos Summit 2007 in Los Angeles.
Revenue per available room, a key measure of hotel financial performance known as revpar, rose 7.4 percent last year despite only marginal growth in room occupancy, according to Smith Travel Research.
"2006 lived up to expectations ... so far for 2007, the crystal ball shows revpar continuing to substantially outpace inflation, although below the gains of 2006," Straneva said at the summit.
The exact trend will depend on U.S. economic growth, he said. Revpar growth is being driven by room rates rather than occupancy, which has started to slip, but Straneva said much of that is due to sophisticated yield management on the part of hotels.
"It's all about selling the right rooms to the right groups," Straneva said.
He acknowledged that there could be some push-back from consumers as prices continue to rise, which is one of the reasons U.S. hotel operators are placing more emphasis on international expansion. Continued...
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