NEW YORK — The hotel industry is continuing to show signs of recovery, with occupancy levels at higher-priced hotels picking up, according to a new analysis by advisory firm PwC.

The firm expects revenue per available room, a key hotel benchmark, to increase 5.9% this year. In 2014, revenue per available room will likely increase 6.2% due to the improving economy and a still-anemic increase in supply of new hotels. Demand for rooms is increasing as leisure and business travel pick up.

PwC’s analysis was based on statistics provided by Smith Travel Research and other research firms.

Despite the growth, fiscal challenges are still ahead, as budget cuts in Washington, D.C., could slow economic growth, the report says.

There are some economic factors working in the industry’s favor, including gains in household wealth at the same time debt is decreasing, a gradual improvement in the job market, and higher consumer confidence.

“Recent performance of the lodging sector has exceeded industry expectations, even as fiscal challenges encourage near-term caution,” said Scott D. Berman, principal and U.S. industry leader of hospitality and leisure at PwC. “Hotels in higher-priced segments are achieving occupancy levels above the prior peak, and looking ahead, the foundation is in place for solid rate gains as travel demand grows and hotel operators adjust strategies accordingly.”

Demand for lodging should increase by 2.2% in 2013, PwC estimated. The supply of rooms, however, will only grow by 0.8%. That should boost occupancy levels to 62.2%, the highest since 2007.

That likely will cause hotels to raise rates. PwC expects revenue per available room to increase 6.2% in 2014. Hotels in urban cities should see the most growth.

PwC expects companies to book more group meetings and events, a lucrative market for hotels. Hotel executives at this week’s New York University International Hospitality Industry Investment Conference, however, said that market is not…