Hotel Rates Will Continue to Surge in 2015

HIL ANDERSON, SENIOR EDITOR
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Oceanside, CA – Increasing demand from group travelers is expected to push U.S. hotel room prices even higher this year after reaching record levels in 2014, lodging industry analysts predicted.

The average daily rate (ADR) for a U.S. hotel room grew 4.6% in 2014 to $115.45 per night, according to STR, Inc., and was expected to grow another 6.2% in 2015 to $122.66. “The 2014 year’s performance broke several records thanks to continued strong demand,” said President and COO Amanda Hite. “The ADR and RevPAR (revenue per available room) for the year were the highest ever recorded by STR, and we expect more growth in 2015.”

The top 25 U.S. markets in the STR survey all reported across-the-board gains in the key metrics of ADR, RevPAR and occupancy levels. Nashville led the increase in ADR with a 19.0% increase to an average of $84.20 per night. The San Francisco/San Mateo market grew ADR by 10.9% to $207.81 per night. A dozen markets had their RevPAR increase by double digits in 2014.  Atlanta had the highest increase in occupancy growth, up eight percentage points to 68.2%.

The STR statistics combined group and transient business across all price ranges. But PricewaterhouseCoopers, LLP (PwC), said in a separate report that growth in demand for hotels in the midscale and upward range would grow between 2.0% and 4.1% in 2015 with an overall ADR of $122.66 likely.

PwC said demand for group travel rooms was “outpacing the transient segment” in 2014. “This solid momentum is expected to continue in 2015, setting the stage for a significant increase in pricing power for hotels, and supporting our outlook for a solid 7.4% increase in RevPAR in 2015,” the report said, noting that about 80% of the 2015 increase would come from higher room rates.

Reach Amanda Hite at (615) 824-8664 or ahite@str.com; Scott Berman, principal and U.S. industry leader, hospitality & leisure for PwC, at (305) 375-6210 or scott.berman@us.pwc.com.