Hotel Development Pipeline Dries up in Q2

The long reported imbalance in hotel supply/demand has let up some, with new development decreasing in the second quarter by 6.2%. That is the result of studies conducted by Lodging Econometrics, the research division of locally based National Hotel Realty. The firm says that the dip in builds is the largest decrease since Q4 of 1998.

In addition, the study reveals that new supply decreased to 3.2% for the first half of the year, down from 4.2% in 1999. The firm notes that project postponements and cancellations are accelerating and that the continued limitations in funding are playing a major part in restricting construction for all but the most experienced developers.

While the current quarter-over-quarter decrease in activity is the largest since Q4 1998, the trend actually began in Q3 of that year, with the Asian financial crisis and the abrupt withdrawal of Wall Street money. The trend is having a beneficial effect on industry performance. Occupancies increased in the first half over the previous year by one percentage point, and RevPAR increases reached the highest levels seen in three years.