Thank you for sharing!

Your article was successfully shared with the contacts you provided.

Patrick Ford, president of Portsmouth, NH-based Lodging Econometrics, keeps a better count of future rooms than anyone else in the hotel industry. He estimates a record 5,807 projects totaling 779,307 rooms in the US construction pipeline during this year’s first quarter, marking the 17th consecutive quarterly increase dating back to 2004. At the same time, he says Canada’s pipeline appears to have reached its peak, totaling 265 projects and 33,964 rooms through the first quarter, after eight straight quarters of growth. The ever-busy Ford took a few minutes out of preparing upcoming Lodging Econometrics reports to discuss the overall state of hotel construction, here and around the globe.GlobeSt.com: Given the current weakened state of the national economy, how long can the US hotel pipeline sustain?

Ford: At this point in time, the economy is not as bad as people thought it might be, even though it’s soft and on the borderline of recession. It’s not gangbusters, it’s not terrific, but it’s stronger than we had anticipated. If I’m a developer, it isn’t bad compared to where I was.The way the credit crisis has rolled out, there’s very little institutional financing available, but a developer in a community or region can still get projects financed. The financing is going to require more equity, the underwriting is going to be much tougher and the terms are going to be more difficult than what they were. But that changes all the time for developers anyway. That’s the nature of their business.

Financing is reasonably available for the parts of the pipeline that are really moving ahead, which are upscale types of properties and mid-market and economy properties. Those developers don’t have a problem. How long will it stay this way? It really relates to where we’re going with the economy and it’s predicated almost perfectly.

GlobeSt.com: If conditions are as gloomy as national news reports portray, what do you think are the chances of an 18th quarter of growth?

Ford: The pipeline will keep growing in the next couple of quarters, but at a moderated pace. There will still be growth, but it won’t be the aggressive nature that it has been. Lots of people are saying things are going to get much worse, and developers respond to that.

GlobeSt.com: You reported just last week that the Canadian pipeline appears to have peaked. What are some of the differences in dynamics between the US and its neighbors?

Ford: First of all, at the economy level, the US has experienced softening ahead of these areas, which haven’t softened to the extent that we have yet. These other areas in the Americas are all pretty heavily tied to the US economy, so what happens in America does impact Canada, the Caribbean, Mexico and Central America. There’s not going to be any decoupling.

You can see from the three rather rapid interest rate cuts by the Bank of Canada (since December 2007) that they’re acting like there’s going to be a growth problem ahead. Canadian developers already have some concern because the pipeline has been in a topping-out formation rather than a growth formation for the last three quarters. They’re looking at the US and saying this is what’s likely to happen in Canada. Developers anticipate there’s going to be problems.

One of the key pieces is American tourism into Canada, which has been declining because of the weaker US dollar and is viewed as far less of a bargain. Because of the softening in the Canadian economy, travel inside of Canada is also projected to decline and soften this year.

GlobeSt.com: You have a report coming out soon about hotel development in the Caribbean, Mexico and Central America. What will it say?

Ford: Latin American economies have been strong and haven’t experienced significant softening to date. The hotel business had a very good first quarter throughout the region. Air traffic into the region is up substantially over last year. Mexico and Central America destinations represent pretty good travel bargains.

The pipeline continues to grow. With the exception of major industrialized cities in Mexico, lots of the development is beachfront throughout the Caribbean, throughout Central America and along the east and west coasts of Mexico. These are mega-resorts and mixed-use facilities, many of them with residential complexes, villas and clusters of hotels where new communities are being built. They attract world-class developers and headline-type lenders, and many of them have multiple partners in the deal. They are the types of projects that don’t fit into cycles and are very long-term viewpoints and timelines attached to them, so what happens today and tomorrow is not as significant compared to what the long-term trends are.

GlobeSt.com: Where do you view the hot spots for international hotel development?

Ford: Dubai has a pretty strong head-start through this decade, with lots of properties currently opening and lots more in the pipeline and under construction. Abu Dhabi is coming out of the box and has plans that are as expansive as Dubai but are probably four or five years behind. Dubai and Saudi Arabia have seen Dubai getting a fast start and there is lots of catch-up going on.

There’s a huge pipeline in China around the Beijing area, which is being powered by the Olympic Games this year, and Shanghai, which is being powered by the 2010 World’s Fair. Macau is the new Las Vegas and, strangely enough, already exceeds Las Vegas in gaming revenue. Hong Kong is also very good.

Singapore historically has been the financial center of Southeast Asia, and as such has been the meetings and convention center. When they look at what Macau has done with gaming and conventions, they have decided to accelerate and move forward. Sheldon Adelson is building an enormous gaming infrastructure with three hotels in Downtown Singapore, and in an off-island situation called Sentosa there are another six world-class resorts going up.

And then there is Russia. You can’t find a hotel room in Moscow!

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?


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.