Wells Fargo: Early Signs Of Pricing Recovery, Expect It To Be Choppy
Wells Fargo mentions, “On average, higher end hotels reported stronger RevPAR and ADR growth than its lower end peers, outperforming by 240 and 380 basis points, respectively. All chain scales posted gains in rate other than Economy.”
“We expect 1) business demand to improve notably in 2010, off low levels/easy comps, 2) growth in group room nights to lag business transient for the year but exhibit strength in forward bookings, and 3) leisure demand to soften as managers rein in discount channels. For the six weeks ended August 7, RevPAR increased 9.4% on the peak weekday and 5.0% on the weekend, and year to date, increased 3.6% and 2.2%, respectively,” the analysts say.
Wells Fargo adds, “Hotel pricing is showing early signs of a recovery in the nation's top markets and that trend should persist if economic growth is sustained. Our RevPAR model, however, indicates demand is insufficient to generate rate growth over a 12-month period until some time in 2011. While we are encouraged by recent trends, our conclusion is that the recovery in rate could prove choppy particularly if economic growth slows. We estimate U.S. rate was up 1.3% on the peak weekday and up 0.7% on the weekend for the six weeks ended August 7, and declined 1.8% and 1.4%, respectively, year to date.”
