The total Canadian Construction Pipeline has 178 projects with 22,592 rooms as of the end of Q3 2009. This is the lowest quarterly total since Q1 2005. New Hotel Openings continue to exit the Pipeline at a high rate for a second consecutive year.
This, combined with further project cancellations and postponements and the dearth of new projects announced into the Pipeline, continues to deplete Pipeline totals and will do so through 2010 and into 2011.
With the current economic, lending and hotel operating environments, developer sentiment is somewhat downbeat. A new development cycle will not begin until the economy improves, distressed loans pass from the banking system, hotel demand increases, rates improve, and the absorption of previous new supply begins.
KEY PIPELINE METRICS
Construction Starts are at a low 10 projects/1,318 rooms. Project migration up the Pipeline towards construction will be slow until operating performance improves and lending terms become less restrictive.
In Q3, 15 projects/1,336 rooms were cancelled or postponed. They are expected to continue at higher than normal rates until developer concerns about the economy, operating performance and lending conditions improve.
At 15 projects, 1,609 rooms New Project Announcements into the Pipeline continue to be low and will remain as such until economic conditions improve and lodging demand increases sufficiently to begin the absorption of recent supply additions.
LE'S FORECAST FOR NEW HOTEL OPENINGS
Although they peaked in 2008, New Hotel Openings continue to be historically high in 2009. Through Q3, 49 new hotels with a total of 5,858 rooms have opened. An additional 12 projects/1,327 rooms are expected to open in Q4. New Hotel Openings will begin to decline significantly in 2010, with LE's Forecast calling for 43 projects/5,593 rooms to enter as new supply. In 2011, a lower 34 projects/4,018 rooms are set to open. With declining Pipeline totals, this trend in New Hotel Openings will continue in a bottoming formation for the foreseeable future.
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