X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

PORTSMOUTH, NH-The total development pipeline fell 5.2% during the second three months of the year as the continued slowdown in guestroom demand has developers reluctant to advance projects up the pipeline or to make any new project announcements, according to Portsmouth, NH-based Lodging Econometrics latest guidance memo to its Wall Street and corporate clients.

Most were delaying in hopes of later opening into a confirmed recovery, according to the memo, which found that the pipeline had contracted by 91 projects or 13,984 hotel rooms as compared to the first quarter. At 1,868 projects comprising 254,317 rooms, the total pipeline is at an all time cyclical low–53% below its record high during the third quarter of 1998, according to the memo.

New project announcements during the second quarter fell to 203 projects totaling 22,263 rooms, the lowest number for this cycle. Exiting the pipeline as new openings were 173 projects comprising 17,381 rooms, also a record low. Another 121 projects totaling 18,866 rooms were either postponed or cancelled, according to the memo.

“Even with financing reasonably available, Developers are reluctant to move projects along due to the uncertain economy and the industry’s continuing slow recovery, causing a portion of the Pipeline to become stalled,” says Lodging Econometrics President Patrick Ford. “There is a ‘bunch up’ of projects that were due to move forward from one stage to another—from Starting Construction Within 12 months to Under Construction and from Early Planning to Starts Within 12 Months—that our researchers reported. It’s on ongoing concern among Developers and Industry Brand Managers alike.”

Of the total development pipeline decrease of 13,984 rooms in the second quarter, the memo stated that 78% or 10,965 rooms occurred in the top 25 markets. One out of three projects that were postponed or cancelled came from the top 25 while only one out of four new announcements was located in the top 25. These were mostly smaller mid-scale and extended stay projects, not large urban center full-service hotels, according to the memo.

“In this demand-induced recession some markets will struggle with additional supply coming on line that was planned earlier in the cycle,” said Ford. “The markets likely to have difficulty over the next 18 months with continued supply growth in excess of demand are Boston, Houston, Dallas, Detroit, Orlando and St. Louis.”

The first signs of a normal migration of projects up the Pipeline along with an increase of New Project Announcements, originally envisioned for the second half of 2003, now seems further outward, perhaps another six months, said Ford.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 3 free articles* across the ALM subscription network every 30 days
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.