PKF
Consulting hosted our Accommodation Outlook Forums in Toronto
and Vancouver in mid November with about 200 key industry stakeholders
participating. PKF Canada representatives were joined by Robert
Mandelbaum, Director of the Hospitality Research Group of PKF
US, based, in Atlanta, Georgia.
In
terms of the US market, Robert spoke about the strong turn around
which began in the 3rd quarter of 2003, and over the course
of 2004 drove strong increases in RevPAR, almost 10%, based
primarily on improved occupancy. PKF’s forecasts for the US hotel
industry in 2005 are calling for modest improvement in occupancy,
but a 4% increase in ADR leading to forecasted Rev Par growth
of almost 7%. With the improvement in top line revenue, will
come improvement in bottom line profits. On a per available room
basis profitability in the US industry will grow by almost 20%
this year, and is projected to grow by a further 13% in 2005.
However at an estimated profit of $10,520 per available room
in 2005, the US accommodation industry will still be 20% below,
the industry highs of 2000.
In the June edition of our Trends Publication and in the September
issue of Hotelier magazine, we released our National Canadian
Market Outlook. As discussed at the Forum, for the most part,
these Outlooks have not changed, with the industry projected
to end 2004 at a 61% occupancy and a $116 ADR, for a RevPAR of
$71. For 2005 we are projecting a 62% occupancy and a $120 ADR,
for a RevPAR of $74, an increase of about 4.5%, not as strong
as the growth projected in the US, but still very strong.
Subsequent to preparing our Outlooks, we surveyed a cross section
of the major hotel companies in Canada to determine their views
on where top lines and bottom lines were headed in 2005.
From
a top line perspective, 60% of the industry respondents expect
RevPAR growth to be somewhere between 2 and 5% in 2005,
and a further 30% expect RevPAR growth to be over 5%. The industry’s
views for RevPAR growth are certainly in line with our Outlooks.
The
industry’s views on RevPAR growth do vary regionally
across Canada.
Fifty percent of the industry respondents expect RevPAR growth
to be somewhere between 2 and 5% in Atlantic Canada in 2005,
and a further 25% expect RevPAR growth to be over 5%. PKF is
forecasting RevPAR, growth of about 4% in Atlantic Canada in
2005.
Seventy-five percent of the industry respondents expect RevPAR
growth to be somewhere between 2 and 5% in Central Canada in
2005, and a further 25% expect RevPAR growth to be over 5%. PKF
is forecasting RevPAR, growth of about 5% in Central Canada in
2005.
Fifty-five percent of the industry respondents expect RevPAR
growth to be somewhere between 2 and 5% in Western Canada in
2005, and a further 35% expect RevPAR growth to be over 5%. PKF
is forecasting RevPAR, growth of about 4% in Western Canada in
2005.
From
a bottom line perspective, the majority of owner’s
and operators are expecting profitability to increase by over
5% in 2005. In fact PKF’s Outlook is for a 9% increase
in profitability next year. This is after a 27% or a $2,700 per
room loss in 2003, offset by a $2,400 per room recovery this
year.After peaking in 2000 at over $11,000 per available room,
profitability has eroded and not recovered as a result, of recent
events. Nationally, industry profit at $9,900 per available room
will still be down in 2005 from the industry high of 2000, by
over 10%. We are however, in a much better position than the
US industry, which as mentioned before will still be down by
over 20% over this same period.
In addition to asking the industry
where they thought top lines and bottom lines were headed in
2005, we also asked them where
they saw hotel investment headed. 90% indicated that they would
continue to look to acquire new assets in 2005. 80% indicated
that their investment criteria had not changed post 2003 and
2004, with 60% of respondents looking for a 10% to 15% return
and 40% of respondents looking for a 15% to 20% return. In
evaluating rate of return, 75% put the greatest emphasis on a
normalized
year or a 3-5 year projection. Only 25% indicated they put
the greatest emphasis on historical or current earnings.
While
the events of 2001 and 2003 combined to have a measurable impact
on the profitability of the industry we believe the prospects
for future growth are positive. 2005 profit levels will get us
back to those of 2002, and will continue to grow annually by
5.0% per annum over the 2005 – 2008 period. Further, the
industry’s appetite for investment in the hospitality industry
remains strong.
All these factors bode well for the industry.
Brian Stanford, CMC
Director, PKF Consulting, Toronto
Please visit our website at pkfcanada.com to download a complete
copy of the presentation.
