new report

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While developers are primarily focused on high-end beachfrontresorts, there is also significant building of mid-scale brands,particularly in Mexico's secondary cities, says Patrick Ford,Lodging Econometrics president. Examples range from the suburbs ofMexico City to towns along the Rio Grande border such as Chihuahua,Juarez and Monterrey.

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"There are two levels of development in Mexico," Ford tellsGlobeSt.com. "A lot of other inland cities are doing a lot ofcommerce and lend themselves to a lot of mid-marketdevelopment."

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Hotel projects under construction reached a new high for thecycle in this year's second quarter, with 169 projects totaling36,139 rooms, based on Lodging Econometrics data. Ford points tothe possibility of another peak occurring in the third quarter,though it might not top last quarter by much.

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"We are at or near the top of the Mexican pipeline," he says,noting that tighter capital markets are taking a toll on futurehotel plans. While those projects now underway have had financingin place for a year or two, those not yet started could be haltedif they cannot line up lending.

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Some developers are resorting to mezzanine financing in caseswhere loan-to-value ratios are being set too low, Ford says. Hecounts 14 project cancellations totaling just more than 3,000 roomsfor the second quarter within the region, noting that guestroomcounts were up slightly, while the project count decreased by onlytwo from the previous two quarters.

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"Banks will lend to highly qualified developers with deep trackrecords and high-profile projects with recognized franchise names,"Ford says. But, as is usually the case in other commercial realestate development forms, projects won't move forward withoutproper leverage, he says.

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Nearly a third of the regional hotel pipeline consists of luxuryand upper-upscale projects, with most located in the Caribbeanisland nations and beachfront resort areas of Mexico, Costa Ricaand Panama, Ford says. Mid-scale development represents anotherthird of the pipeline, with roughly seven out of every 10 projectsgoing into Mexico's secondary cities.

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Lodging Econometrics cites 27 new hotels with 4,688 rooms havingopened through the first half of this year. Its forecast for newopenings in 2008 is revised slightly downward, to 79 hotels withnearly 14,000 rooms.

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