December 18, 2012

RevPAR still has a long way to go

Given that nobody objectively outside the hotel industry thinks the economy is going to grow much in 2013, it is highly likely there will be minimal progress in inflation, RevPAR and maybe minimal growth in real ADR increases.

The Federal Reserve is projecting a slow economy through 2015 or later, and many believe this projection is the most likely scenario. There are too many black swan events circling right now to be able to clearly predict anything.

The fiscal cliff is unlikely to get truly resolved, which will exacerbate corporate reluctance to spend or hire. Syria is about to explode. Egypt is in very unstable turmoil. And Iran will be dealt with in 2013, which could cause a major war given the other instability in the region. If there is another drought next summer, it will create new problems. Taxes are going up and government expenditures are going down by some large number.

None of that will help stimulate the economy for several years. None of that will translate to materially higher real dollars of RevPAR.

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