Lodging Econometrics president Patrick Ford tells GlobeSt.comthat the hospitality market is "virtually shifting under ourfeet.'' With warnings of danger in securitized sub-prime mortgagesand adjustable rate mortgages beginning in 2006 and exploding in2007, there has been a very long lag for these issues to affect thehospitality industry, he says.

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Ironically, this same period was a heyday for the hospitalityindustry nationally, Ford says. The lodging industry postedrecord-breaking occupancy, RevPar and room profit in 2006 and 2007."Lodging at an operational level didn't feel any impact (from theeconomic slowdown) until November, December and early January, whenwe began to see a little bit of impact on demand and occupancies,''Ford says.

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"The whole credit crisis emerged at lightening speed, so quicklyand its impact so enormous, we now think it could be a long-termsubject, the (mortgage) credit crisis, since last spring is justnow having an impact on lodging, just in the past eight or 10weeks….I can't look forward and estimate and project what willhappen. Is it a slow down or a recession?'' he says. "That's what'smoving under our feet as we speak,''

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Ford says the last lodging real estate bottoming out was in2003. "Over the years we predicted that stimulus in the hospitalitydevelopment would last until 2010, (but) about a year ago wechanged our mind and saw an end in 2009, a soft landing," hesays.

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Now the lending pipeline for lodging properties "is closeddown,'' Ford says. "The selectivity by lenders is horrible'' withproven developers needing 35% to 40% for a large project to even beconsidered, he says. "No one is thinking large projects thisyear,'' Ford says.

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Projects in the pipeline that "haven't started locatingfinancing yet'' will find out that they've missed the boat, exceptin the sector of limited-service, small hotels in the 200-roomrange. The limited service smaller hotels are the play during thiscredit crunch.

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"Why the (construction) pipeline is at record levels is thatdevelopers are internally optimistic and have been announcingprojects with the idea they'll have time to source the financing,or that the financing crisis will clear up right now," Ford says.Those account for thousands of units in the so-calledrecord-breaking pipeline that won't see one shovel of dirt turned,he says.

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His company reported that Q4 2007 showed a 36% increase inpipeline totals, with 1,565 projects totaling 223,997 rooms,compared to Q4 2006's 1,237 projects totaling 166,733 rooms. Thebalance of the 718,000 rooms in the pipeline is either underconstruction, scheduled to start within the next 12 months, or inearly planning. In 2007, 985 hotels opened with a combined 100,507rooms. Lodging Econometrics predicts 1,208 hotel openings totaling133,269 rooms in 2008, and 1,456 new projects opening with 166,236rooms in 2009.

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