Projects Build Up In Early Planning As Developers Schedule Market Entry For 2014 & Beyond
The lack of available financing and continued economic uncertainty remain major obstacles to Construction Pipeline growth, which is channeling in a bottoming formation for a 7th consecutive quarter. Project migration up the Pipeline toward construction is sluggish, resulting in extended timelines as developers wait for a more certain economic, lending and operating environment. Amidst a renewed emphasis by franchise companies to refresh their branded properties, many owners and investors who have accumulated funds from improving operations are now focusing on renovating existing hotels after a long period of postponement.
Projects Under Construction saw a slight increase over Q2 2011, but remain at cyclical lows, with 408 projects/51,599 rooms currently underway. Scheduled Starts in the Next 12 Months decreased again, falling 200000 below the 100,000 rooms level for the first time in memory to a low of 834 projects/94,755 rooms. Due to the current complex economic environment, Sche uled Starts are expected to trend further downward, as developers, seeking the ideal time frame to open, continuously reassess the feasibility of getting their projects underway. In several cases, they have moved projects
out of the 12 months to start window back into Early Planning while they await more favorable conditions.
At 1,609 projects/201,576 rooms, 56% of Total Pipeline projects and 58% of rooms are now disproportionately stockpiled in Early Planning. The back end of the Pipeline has built up due to the backward migration of projects from Scheduled Starts, and also because many New Project Announcements (NPAs) are enter- ing the Pipeline at this stage and not being fast-tracked. Until the overall economy recovers more substantially and financing becomes more readily available, many developers continue to plan new projects, but anticipate that it will be 12-24 months before those projects move forward in the Pipeline.
Because timelines for projects exiting the Pipeline continue to be extended, LE has again revised its Forecast for New Hotel Openings slightly downward for the next three years. LE now projects a total of 375 new hotels/39,636 guest rooms to open in 2011, then 339 hotels/38,287 rooms in 2012. In 2013, 370 hotels/38,248 rooms are anticipated to enter Current Supply. Additional downward adjustments to LE’s Forecast may be ahead if there is not a near-term resurgence in the general economy.
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About Lodging Econometrics
With over 30 years of experience in lodging real estate, Lodging Econometrics (LE) offers expertise in all facets of lodging real estate, including the Construction Pipeline, Brand Conversions and Announced Renovations, the Census of Open and Operating Hotels, and Transactions and Property Transfers. LE provides an array of informative and timely subscription and single-issue reports for a global clientele, including hotel franchise companies, real estate ownership groups, management companies, REIT's, opportunity funds, lending institutions, consultants, analysts, appraisers, and vendors to the lodging industry.
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