Lodging Econometrics Has Announced Its Forecast for New Hotel Openings for 2013

For the first time, Lodging Econometrics has announced its Forecast for New Hotel Openings for 2013. A total of 409 new hotels/39,162 guest rooms are anticipated to come online. LE also adjusted its Forecast for 2011 and 2012 down slightly, as continued economic uncertainty and the lack of construction financing still hamper development. In 2011, 390 hotels/42,187 rooms will open, with an additional 368 hotels/40,070 rooms to open in 2012. Net supply growth, after removals from inventory, will range from 0.6%-0.8% for each of the next three years.

The economy continues to struggle to sustain recovery, with recent setbacks in unemployment and consumer spending, fears of a double-dip recession, and concerns about the nation’s debt level. Developers are cautious and, for the most part, are on the sidelines as they await further improvements in the economy and guest room demand.

New Project Announcements (NPAs) into the Pipeline are trending downward, with just 187 new projects/23,795 announced in Q2. The total number of NPAs has been insufficient to offset total New Openings and project Cancellations exiting the Pipeline. Since NPAs are expected to stay at low levels for at least the next two years, it will be a while before they begin to surpass exiting projects, which would signal the start of a new development cycle. As a result, Total Pipeline counts will likely remain in a bottoming formation through the middle of the decade.

At 2,818 projects/339,866 rooms as of the end of Q2, total Construction Pipeline projects are down 15% and rooms 13% year-over-year (YoY). Financing difficulties continue to dampen project migration up the Pipeline toward construction, keeping Under Construction counts at lows not seen since the early 1990’s. At 387 projects/49,028 rooms, Under Construction totals represent a meager 14% of all Pipeline projects and rooms. Scheduled Starts in the Next 12 Months have also declined, reaching a new cyclical low of 950 projects/105,715 rooms. These are the main reasons why New Openings will keep trending at low levels.

The Early Planning stage, at 1,481/185,123 rooms, contains over half of all Pipeline projects and rooms, a growing trend for the fourth consecutive quarter. Developers are introducing projects at the Early Planning stage and continuing their planning, but are awaiting improvements in the financing environment and lodging operating metrics before advancing forward toward construction.

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