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Hotels are building and booming

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Brace yourselves: PricewaterhouseCoopers (PWC) is betting hotel prices will continue to rise, despite the construction of 119,000 new hotel rooms.

According to its 2006 Average Daily Room Rate (ADR) Forecast, the increase in hotel rates for first quarter 2006 exceeded PWC’s predictions. Combined with consumer price inflation (caused by soaring energy costs) and an occupancy rate expected to reach 64.3 percent this year, PWC is betting that this year’s ADR growth will be at 6.4 percent, the highest since 1984. PWC expects the average daily rate for U.S. hotels will rise to $96.69 from $90.91, the largest dollar amount increase ever experienced in the lodging industry in a single year.

The lodging industry is experiencing other highs as well, particularly the largest three-year U.S. revenue per available room (RevPAR) increase since 1981, which has rekindled interest in new hotel development. Forty-five percent more new hotel rooms are under construction this year compared to 2005, the highest level of new room construction since 2000.

But PricewaterhouseCoopers doesn’t expect the addition of new hotel rooms to lower hotel rates anytime soon. The company projects demand will continue to outpace supply through 2007.