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Portsmouth, N.H.
– Lodging Econometrics (LE), the Global Authority for Hotel Real Estate,
reported to the Lodging Industry that there are a total of 814 hotels
having 139,133 rooms in the Construction Pipeline throughout Europe.
LE President Patrick Ford said, “Hotel Construction is at a robust pace.
Half the Pipeline, 407 projects / 72,205 rooms, are already Under
Construction. That means that a record 292 hotels / 45,598 rooms are set
to open throughout the region in 2008.
“In light of the prosperous economic conditions throughout Europe, the
timing of this construction spurt is ideal,” said Ford. “In particular,
the region’s capital cities have been experiencing robust hotel
occupancies, and many have enjoyed double-digit year-over-year room rate
increases in 2006 and again in 2007, strong indicators of a shortage of
guestrooms in many markets.”
Lodging Construction is Led by Largest European Economies
The United Kingdom has the largest Pipeline in the region by far, some
two and a half times greater than Spain, which is in second place. Of
the U.K.’s 277 projects / 40,441 rooms, nearly a third of the rooms are
in London, which is experiencing its best operating performance since
the late 90’s.
While projects in most markets are planned
to open near the top of the present economic cycle in 2008 – 2009, the
Construction Pipeline in the U.K. is expected to continue to expand and
unfold at a growing pace well into the next decade.
London is the key travel market and generates a spillover effect for
many other areas. It enjoys one of the highest occupancies and room rate
levels in Europe. Lodging demand is burgeoning. London is a rapidly
growing international financial center with a booming office and
residential market. It benefits from a rising flow of travelers from
China, India, the Middle East, and Eastern Europe. A new transportation
hub at St. Pancras Station, scheduled to open soon, and another terminal
at Heathrow Airport in 2008 will boost travel further. Both planned
hotel development and traveling are even further amplified by the
building and preparation for the Olympic Games scheduled for 2012.
Russia, based on GDP growth, is one of the fastest growing economies in
the region, and has an escalating pipeline as well. Buoyed by its oil
and gas development, 31 of Russia’s 45 planned hotels are located in
Moscow and St. Petersburg, which together account for 77% of all
guestrooms under development. Projects in both cities are large, iconic,
and will carry four- and five-star international brands.
Another five European countries have between 15-30 projects each in the
Pipeline, led by Portugal, Austria, Turkey, the Netherlands and the
Czech Republic. All are smaller countries, but with Pipelines measured
as a percentage of their existing Census of Open and Operating Hotels,
they have impressive Pipelines indeed.
Following London, there are another 14 major European cities with
between 10-20 each planned projects in the Pipeline. Most of the
countries and cities have around 50% of their projects already Under
Construction, with New Hotel Openings scheduled to peak in 2008 - 2009.
International Hotel Companies Are Active in Gateway and Secondary
Cities
For years, the major international lodging companies have concentrated
on expanding their four- and five-star marquis brands in Europe’s
gateway cities. Their Construction Pipelines continue to unfold.
However, the companies with the largest Pipelines today, having the best
opportunity to capture the greatest market share across the continent,
are those that have chosen to deploy a full roster of upscale and
mid-market brands in suburban locations and secondary cities throughout
the region.
These smaller projects are ideal growth vehicles for gaining market
penetration and capturing market share rapidly. Timelines from project
inception to opening are far shorter. Land costs are less expensive,
permitting is easier, and construction costs are less. To accelerate
mid-market development, the international brands often seek experienced
financial and/or development partners who will commit to develop a large
roster of projects in certain areas and within a specific time period,
most often with the brand managing the properties.
Brands with a long-time European presence have the largest Construction
Pipelines today. InterContinental has 64 Express by Holiday Inns and 25
Holiday Inns being actively pursued by developers. Accor has 41 IBIS and
24 Etaps; and Rezidor has 17 Park Inns. Marriott's strong Pipeline
includes 11 Courtyards, but the company has four other upscale and
mid-market brand offerings in the U.S. that they have not yet decided to
deploy internationally.
Other companies also have impressive brand distribution plans rolling
out. When the Hilton Corporation merged with Hilton International, they
inherited an international roster of full-service Open and Operating
Hilton Hotels and an impressive Pipeline of projects under development.
A significant opportunity driving the merger was the launching of
Hilton's entire family of upscale and mid-market brands across the
globe: Doubletree, Hilton Garden Inn, Hampton Inn, and Homewood Suites.
Newly formed development teams are in place in London and in Singapore
to accomplish just that. A number of joint ventures have already been
announced to accelerate the launch of these brands.
For newly created brands, Starwood Hotels has begun their international
rollout of aloft. Earlier, InterContinental introduced Staybridge
Suites, and Hotel Indigo, their new contemporary upscale brand, is
following.
The high number of projects already Under Construction and the Forecast
for New Hotel Openings scheduled for 2008 and 2009 all seem fortuitously
timed. Recent credit restrictions will understandably make it a bit more
difficult for those developers who have yet to obtain financing. A
period of more selective credit granting that is likely to extend
Pipeline timelines is upon us. The impact on the existing Pipeline will
be a modestly higher-than-normal flow of project delays, and perhaps
cancellations for some of the more marginal projects. If financing is
attained, it's likely to take longer, be at higher rates and require
more of a cash infusion by the investors. That may well cause a second
look at some proposed projects' feasibility, particularly if there is
any forthcoming fall-off in guestroom demand associated with slowing
economies.
Offsetting project counts and timeline adjustments to the current
Pipeline is an expected heavy flow of newly announced branded upscale
and mid-market projects into the Pipeline. Europe is one of the most
promising regions in the world for those international companies looking
to widely deploy a full family of brands.
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