Rising room rates will increasingly drive RevPAR growth in 2019, giving hoteliers confidence, according to PwC’s “Hospitality Directions US” report.

THE SECOND QUARTER of 2018 saw a strong performance by the U.S. hotel industry, and strong room rates are expected to drive RevPAR growth next year, according to accounting firm PwC’s “Hospitality Directions US” report. However, the firm does remain concerned that growing trade tensions between the U.S. and China and the rising cost of labor could put a damper on the economy and the hotel industry.

RevPAR grew 4 percent over the same time last year as rates grew 2.9 percent. Occupancy stands at 65.9 percent due to growing demand. Group travel demand rose 2.1 percent in the first half of 2018, and commercial transient demand also grew. PwC expects the ongoing growth in demand to continue pushing up occupancy and raising hotels’ pricing power so ADR will drive RevPAR to grow 3.3 percent.

Those rising room rates will increasingly drive RevPAR growth in 2019, giving hoteliers confidence, according to PwC. It will be the first time since 2007 that room rates have driven RevPAR, the report said.

“Consumer spending is forecasted to increase as lower personal tax rates and low unemployment continue. The industry is expected to continue to benefit from an improving economy stemming initially from the Tax Cuts and Jobs Act, with potentially higher group spend and increased commercial transient demand,” the report said. “Economic factors that may dampen the industry confidence and the perceived positive impacts of the Tax Cuts and Jobs Act are the trade tensions with China and rising costs of labor for entry-level jobs, stemming from the continued low unemployment rate.”