Moody’s Lowers U.S. Lodging Industry Outlook as Economy Slows
Moody’s Investors Service lowered its outlook for the U.S. lodging and cruise industry as slower economic growth threatens to limit demand for travel.
The rating company reduced its outlook to stable from positive, according to a statement today. Growth in revenue per available room, a key industry metric measuring rates and occupancy, probably will slow to 3 percent to 7 percent in 2012 after rising at least 7 percent this year, Moody’s said.
“The change reflects significant risks to the economic outlook,” Margaret Holloway, senior credit officer at New York- based Moody’s, said in the statement. “The slow economy will weigh on operators’ ability to raise rates, which will slow profit growth.”
Shares of hotel operators have tumbled this quarter as U.S. job growth stalled and the Federal Reserve said there are “significant downside risks” to the U.S. economy. The country is “tipping into a new recession,” Lakshman Achuthan, chief operations officer for the Economic Cycle Research Institute, said today in an interview on “Bloomberg Surveillance.”
Marriott International Inc., the largest publicly traded U.S. hotel chain, has dropped almost 22 percent in the third quarter, the most since the end of 2008. Starwood Hotels & Resorts Worldwide Inc. (HOT), owner of St. Regis and W brands, has lost 29 percent, while Hyatt Hotels Corp. (H) dropped 22 percent. The declines were steeper than the slump in the Standard & Poor’s 500 Index, which has fallen 13 percent since June 30.
Lodging industry profits probably will increase 2 percent to 6 percent next year, according to Moody’s. Corporate rate negotiations may be more difficult than initially expected for 2012, making it unclear how much operators can raise average daily rates, according to the company.
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