Patrick Ford, president of Lodging Econometrics, says theCanadian lodging market parallels the US in many aspects, includinga financing crisis, sputtering economy and softening hotelindustry. However, the US has a larger pipeline (5,652 projects asof Q3) and Canada's hotel development is largely concentrated inthe mid-market and economy sectors, Ford adds.

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He foresees a progressive dwindling of projects in thedevelopment channel. "We expect that there will be a continued flowof cancellations and stalling inside the pipeline of hotels notbeing able to migrate forward toward construction as a function offinancing as well as the economy and how it's impacting lodgingoperations," Ford says. "Developers today have two things toconsider about whether to move forward: One is how the lodgingindustry is doing and secondly, the lack of financing." However,just as in the US, financing for smaller projects is available fromlocal lending institutions, Ford notes.

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In addition, Ford anticipates new project announcements willdiminish as well. In fact, LE counted only 14 newly announced hotelprojects with 1,236 rooms, the lowest level since the firm begandocumenting that category in the first quarter of 2005. Nineprojects/897 rooms were either cancelled or postponed in the thirdquarter, which follows the cycle's largest pipeline withdrawal inthe second quarter. Construction starts hit a cyclical peak in Q2'07 and have since continued to descend over the past fivequarters, landing at 18 projects/1,896 rooms in Q3.

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At the same time, the pace of new hotel openings willaccelerate. "That's because a third of the pipeline is alreadyunder construction," Ford says. "In a sense, the pipeline will beemptying out because of new openings and cancellations, and it willbe not be replenishing because new project announcements aredeclining."

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More than half—56%—of the total pipeline are concentrated injust six Canadian cities: Toronto, Niagara Falls, Vancouver,Edmonton, Montreal and Calgary. "Those are the economic centers" ofthe country, Ford points out.

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In Q4, LE projects that 18 new hotels with 1,862 keys will open.That's on top of the 56 new hotels/6,768 rooms that have beendelivered so far in '08. For 2009, 70 hotels/8,746 rooms areexpected to come on line, a gross growth rate of 3.1% beforeremovals from inventory. That is down from the firm's previousforecast of a 3.3% increase. LE has adjusted its forecast for 2010downward as well, with an estimate of 73 lodging properties/8,629keys making their debut, a 2.9% gross growth rate.

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