Performance of the US lodging sector during the fourth quarter of 2015 was lackluster, with hotels struggling to meaningfully increase average daily rates ("ADR"), even as occupancy levels continued to increase, albeit at a slower pace. The overarching question related to the lack of ADR growth, despite peak occupancy levels, raises concern in the industry. However, underlying corporate and leisure travel demand trends remain favorable, contributing to still increasing occupancy rates, which are at the highest level since 1981. 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 2.4 percent in 2016, measured on a fourth-quarter-over-fourth-quarter basis, approximately 10 basis points lower than in PwC's November lodging industry outlook. Macroeconomic Advisers' reduction in GDP growth is primarily driven by less economic momentum and less favorable financial conditions, including a strong US Dollar. Based on this analysis and recent trends, PwC expects lodging demand to remain strong in 2016, driven by a number of factors including continued strong fundamentals of employment, wages, and wealth as well as improving group demand. The pace of growth in the supply of hotel rooms is expected to increase to 1.9 percent, reaching the long-term average. As a result, PwC's outlook anticipates a marginal increase in occupancy levels to 65.7 percent; the highest since 1981. With occupancy levels at a 35-year high, increased confidence amongst hotel operators and brands is expected to result in more meaningful average daily rate increases, albeit offset by the continued strength of the US Dollar, resulting in RevPAR growth of 5.5 percent. "Recent turmoil in the financial markets and the lower-than-expected economic growth in the fourth quarter have raised some concerns," said Scott D. Berman, principal and U.S. industry leader, hospitality & leisure, PwC. "However, industry fundamentals are solid heading farther into 2016, including the pace of corporate group travel. We expect peak occupancy levels in select markets should give hotel operators the confidence to meaningfully increase average rates, although the strength of the US Dollar may have an impact, particularly on gateway markets."