Last year, both individual and group travel exhibited strong momentum, with the year-over-year pace of growth in group travel outpacing the individual travel segment. This solid demand momentum, coupled with supply growth that is expected to remain below the long-term average, is anticipated to set the stage for a significant increase in pricing power for hotels, supporting our outlook of a solid 7.4 percent increase in RevPAR in 2015. With industry occupancy expected to reach levels not seen since 1984, over 80 percent RevPAR growth in 2015 is expected to come from increases in average daily rate – the highest contribution average daily rate has made to RevPAR growth in the current economic cycle. The estimates from PwC are based on a quarterly econometric analysis of the lodging sector, using an updated forecast released by Macroeconomic Advisers, LLC in January and historical statistics supplied by STR and other data providers. Macroeconomic Advisers expects real gross domestic product ("GDP") to increase 3.0 percent in 2015, measured on a fourth-quarter-over-fourth-quarter basis. Based on this analysis and recent demand trends, PwC expects lodging demand in 2015 to increase 2.6 percent, which combined with below long-term average supply growth of 1.5 percent, is anticipated to boost occupancy levels to 65.1 percent. As the lodging development pipeline continues to fill up, supply growth is expected to accelerate from 0.9 percent in 2014 to 1.5 percent in 2015, but still remain below the long-term average of 1.9 percent. While hotels in the higher-priced segments are expected to benefit the most from returning pricing power, occupancy levels in the lower-priced chain scale segments are expected to approach or exceed prior peak levels, as price-driven compression from higher-priced hotels drives demand to lower-priced hotels. "2014 was a year of pleasant surprises for U.S. hotels on many fronts, including a meaningful recovery in group demand not seen since 2010," said Scott D. Berman, principal and U.S. industry leader, hospitality & leisure, PwC. "With a strong near-term economic outlook, solid business and leisure travel trends, and below average supply growth, owners and operators can expect to have significant pricing power yielding higher room rates in 2015." Get the full story at PwC (PDF 147 KB)