ENCINO, CA--Marcus & Millichap Real Estate Investment Services Inc. reports the recession continues to erode room demand, forcing hotel owners to increasingly consider lowering their average daily rate (ADR), a strategy that will put downward pressure on revenue per available room (RevPAR).In the months ahead, challenges will persist for owners, as many measures of economic activity indicate that further declines in room demand will occur and greater pressure will be exerted upon profitability.
Occupancy of 50 percent, often considered the minimum target threshold to attain profitability, has been equaled or exceeded on fewer than half of the days thus far in 2009, down from 73 percent in the corresponding period last year.
Supply growth, meanwhile, has contributed to the sharp downturn in property fundamentals over the past several months, and more than 130,000 additional rooms are expected to be delivered this year.
The projected increase in supply will put further pressure on owners to discount rates in order to retain market share. On a positive note, however, challenges obtaining construction financing may defer or cancel some projects, thereby easing the effects of supply growth on other fundamentals.
For a complete copy of the company's report, please contact:
Stacey Corso, Communication Director, stacey.corso@marcusmillichap.com
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