|
Portsmouth, NH, USA –
Lodging Econometrics (LE), the Global Authority for Hotel Real Estate,
announced that the Construction Pipeline stood at 5,807 projects and 779,307
guestrooms at the end of Q1 2008, a record high for both project and room
counts. The pipeline continues to soar. It’s a 60,920-room boost, an 8.5%
increase over Q4 2007, and the 17th consecutive quarterly increase dating
back to 2004. All projects have dedicated land parcels, are being actively
pursued by developers and have been verified by the brands.
For the quarter, Newly
Announced rooms into the Pipeline totaled 125,442, an all-time high.
Although offset by rising Cancellations and by New Hotel Openings coming
online in the first quarter, the Pipeline surprisingly continued to grow at
a rapid pace.
Ford continued,
Developers remain bullish about the future. For hotels under 200 rooms in
the upscale, mid-market and economy sectors, financing is still available,
albeit at much more difficult terms. At this time, regional banks and
dedicated national lodging real estate lenders continue to be less
constrained by the lending crisis.
With 73 projects larger
than 200 rooms newly announced into the Pipeline, there was a significant
room increase in Early Planning in Q1 2008. Thirteen projects were casinos,
while thirteen others were already branded, seven of them by Marriott. The
remaining projects are presently classified as
Independents.
Approximately 70% of them will choose a brand prior to opening. These
projects will open in the next decade as their developers anticipate that
the lending crisis will right itself before they seek financing.
It’s clear that
developers see the softening economy throughout 2008, and perhaps 2009, as a
shallow downturn. They view the lodging industry as a quite healthy,
attractive investment class likely to bounce back quickly.
Construction Starts are Accelerating
A growing Pipeline
means higher Construction Starts. Year over year (YoY) Construction Starts
increased 35% to 176,172 rooms in 2007, compared to 130,132 in 2006.
Historically, the first quarter is always the slowest Construction Start
quarter of the year. However, an unsurpassed 51,864 rooms started construction in
the first quarter, the highest total of all quarters recorded this decade.
The Forecast for New Hotel Openings is on the Rise
Higher Construction
Starts translates into a growing Forecast for New Hotel Openings. The
Pipeline just began to unfold in earnest last year with 101,238 new rooms
opened. LE’s latest forecast calls for 1,190 projects/133,623 rooms to open
in 2008 for a gross growth rate of 2.8%, with 1,545 projects/ 170,417 rooms
in 2009, a gross growth rate of 3.5%.
Assuming that removals
from inventory for closings, renovations and redevelopment for alternate use
return to normal and after accounting for delays in reporting, the net
growth rate which is nearly impossible to predict, should approximate at .3
to .5 points lower.
Significantly, 80% of
the 304,040 rooms forecast to open in both 2008 and 2009 combined are
already Under Construction.
With declining
occupancies likely and perhaps softening demand ahead, the Forecast for New Openings may appear more problematic in the future than it might have
earlier, had there not been such an abrupt change in economic trends last
fall. Absent that, New Supply in 2008 and 2009 might have been appropriately
calibrated and more easily absorbed. It now appears existing open and
operating hotels in many markets are likely to be impacted by new supply
coming online over the next few years.
Pipelines in Major Markets are Growing
Significantly, seven
hotels greater than 1,000 rooms were announced into the Pipeline in the
first quarter, four of which were removed from the Pipeline in years past
and have since been reactivated. Of those seven, three are Casino projects,
while another is a 3,500 room Marriott in Las Vegas.
Of the leading markets,
seven have more than 100 projects in their Construction Pipeline, while ten have more than 10,000 rooms. Six of the markets have total room counts in
the Pipeline greater than 25% of their existing census and bear continued
monitoring.
Houston and New York
are rapidly climbing up the list. Although somewhat offset by other project
cancellations and new openings, they respectively had a whopping 61 and 57
New Projects announced into the Pipeline over the last two quarters.
LE’s Outlook
There’s considerable
churn in the Pipeline. New Openings are growing and Project Cancellations
are increasing. But, New Project Announcements are greater, so, for now,
total Pipeline counts remain on an upward trajectory.
LE’s supply growth
forecasts for 2008 and 2009 are near certain, as 80% of the forecasted new
rooms are already in the ground.
Supply growth in 2010
and 2011 will depend on whether the softening economy significantly affects
lodging. Changes in Operating performance might alter the perception of
lodging as an attractive investment class, impacting both developer and
lender attitudes, causing a higher flow of cancellations and a slowdown in
new project announcements.
Supply growth rates are
also dependent upon how long regional lenders can continue to side-step
balance sheet tensions that would cause them to cut back on commercial
lending.
It’s a bit of a
wait-and-see situation.
Lodging Econometrics (LE) of Portsmouth, NH is the global authority for
hotel real estate. LE conducts Supply Side research for all markets,
developers, companies and brands— worldwide!
Answer any development or investment question you may have. Inquire
today about LE's extensive product line:
- Monitor the entry of new supply for any market or country with LE's
Development Pipeline Reports & Three-Year Forecast for New
Hotel Openings
- Keep a vigilant watch on valuation changes that influence
your decision-making with
LE's Sales Comps for all Recent Hotel Transactions
- Look to add to your hotel portfolio using LE's
comprehensive
Contact Names for Owners and Management of Open and Operating Hotels
(Census)
Reports may be purchased as a:
· One-time Order · Quarterly Subscription · Corporate Site License for
Your Intranet
To learn more about LE's products and services, please contact LE at +1
603-431-8740 ext. 25. Or visit online at www.lodgingeconometrics.com
Email:
hotels@lodgingeconometrics.com
|
