While the seller’s market is undoubtedly here to stay for a while, Lodging Econometrics’ mid-year report is forecasting increasing growth in new hotel inventory, up to a 2.8 percent increase in gross supply by 2008. More than 1,000 new hotels, including 131,517 new rooms, are expected to come online in 2008. This shows a steady growth in hotel inventory, from 1.6 percent last year, to 1.9 percent in 2006, and a projected 2.6 percent growth in 2007. However, while new construction in the second quarter of this year is higher than it has been in recent years, it still lags the all-time high set in 1998. The report predicts a new high could be set in 2007, as long as rising interest rates don’t cause developers to slow construction plans. Other potential hindrances to increased inventory include a more conservative investment environment, increasing prices for land, and higher costs for construction materials.

LE president, Patrick Ford, predicts that Chicago, Dallas, and Denver will join Atlanta and Nashville in returning to pre-9/11 operating levels this year; followed by Boston, Detroit, and San Francisco next year. Washington, D.C., New York, and Los Angeles have already returned to pre-9/11 occupancy, room rate, and revenue-per-available-room (RevPAR) levels, and should have enough business to sustain the new hotels being planned. Washington, D.C., has 69 projects in the construction pipeline as of Q2 2006; New York has 57, and Los Angeles has 50 projects on the books. Dallas and Atlanta also are among the cities with the most planned projects, with 57 and 49, respectively, according to the report.