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Ford

Canada’s hotel construction pipeline appears to have reached a peak in the first half of 2008, according to a new report released Thursday by Lodging Econometrics. A total of 245 projects with 32,499 rooms are recorded through the second quarter, down slightly from 265 projects with 33,964 rooms in the first quarter.

An increase in new project announcements for the most recent quarter was offset by a higher number of project cancellations in the same period, the report states. At the same time, one third of the Canadian pipeline is already under construction and is certain to open in the coming year.

The second-quarter decline brings an end to two solid years of hotel growth within North America’s provinces, with developers now turning cautious because of the slowing economy and little or no financing for future projects, says Patrick Ford, president of Portsmouth, NH-based Lodging Econometrics.

“The blueprint in how it’s rolling out is almost parallel with the states,” Ford tells GlobeSt.com, pointing to a similar peak in the US hotel pipeline. While he terms the decline in hotel development between the first two quarters in Canada as “modest and moderate,” he says his firm has revised its forecast for new hotel openings downward to 3.4% gross growth this year and 3.3% in 2009.

New projects announcements into the pipeline, at 29 projects with 3,129 rooms, are at their second-lowest point since the end of 2005, while project cancellations, at 24 projects and 2,302 rooms, are the highest ever recorded by Lodging Econometrics, Ford states in the new report for Canada. Construction starts within the pipeline, at 19 projects with 2,142 rooms, have been sluggish for the last three quarters, he says.

Despite an abundance of commodities that theoretically would help prop up its economy, Canada is suffering the same residual slowdown effects experienced throughout the rest of the world, Ford says. “Canada is a country with resource wealth, whether you’re talking lumber, minerals, energy or oil,” he says. “It has always had solid exports, but those exports will soften as the world economies soften.”

Ford adds that tighter lending restrictions by Canadian banks, in similar fashion to those in the US, are stunting plans for new projects as well as previously announced projects that are having trouble moving forward because of financing difficulty. “Migration up the pipeline is slowing and the size of the pipeline is decreasing,” he says.

A nationwide total of 37 hotels with 4,173 rooms opened in Canada in the first half of this year, with Lodging Econometrics forecasting 80 openings with 9,288 rooms for all of 2008. The firm predicts 73 hotels with 9,386 rooms opening in 2009, followed by 92 hotels with 10,689 rooms in 2010.