The recession of the past two years will affect new hotel construction for the next three years, and the projected slowdown in supply is good news for the hotel industry.
A lack of financing for new hotels has stalled many projects in the construction pipeline, according to Lodging Econometrics, Portsmouth, N.H. “The total number of projects pres¬ently under construction, at 487 projects/62,041 rooms, is the lowest we’ve ever recorded,” LE officials stated in a press release. That’s down about 72 percent from the pipeline peak in the second quarter of 2008.
Further, the number of construction starts over the next 12 months is 1,218 projects/129,356 rooms, which is the fewest since the end of 2004.
The overall hotel construction pipeline—which includes hotels that are either under construction, scheduled to start in the next 12 months, or in the early planning stages—now includes 3,221 projects and 386,656 hotel rooms. Those numbers are the lowest in five years and are 45 percent off highs from the second quarter of 2008.
“The result of these bottoming metrics is that hotel openings coming online as new supply in 2011–2013 will be at rates lower than at any time since the early 1990s,” LE officials added.
This is good news for hotel owners and operators, said LE officials. “The timing of the slowdown in new openings could not be more perfect.” After two-and-a-half years of steady operating declines, the industry began its recovery in earnest in early 2010. “These operating improvements are better than expected and should con¬tinue trending upward, as there will be few new supply headwinds to overcome for the foreseeable future.”