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 New Hotel Projects with Condo, Private Residence and Timeshare
Componets Set to Decline as Developers, Lenders
and Consumers Turn Cautious
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Portsmouth, NH – April 14, 2006 - Lodging Econometrics (LE), the Industry Authority for Hotel Real Estate, in a mid year report released its forecast through 2008 for three important sectors of the Lodging Development Pipeline; Condo Hotels, Hotels with Private Residences and for Timeshare and Vacation Club projects.  
 
LE’s president, Patrick Ford, said, “New Project Openings for Condo Hotels are set to accelerate and forecasted that 27 projects will open in the second half of ’06, with another 37 scheduled to come on line in ’07 and 39 more in ’08.  For the period in aggregate, a total of 103 new projects having a planned 23,143 condo hotel units and 5,315 developer owned guest rooms will open.  The average size of each project will be 276 quest rooms.”
 
Ford indicated that, “76 of the 103 projects are already Under Construction.  In the next 12 months, an additional 32 projects are Scheduled to Start Construction while another 38 projects are being actively pursued by developers and are in various stages of Early Planning.  78% of the Condo Hotel projects are New Construction while 22% are Open and Operating Hotels that will convert all or a portion of their guest rooms to condo ownership.”
 
Las Vegas, Orlando, Miami and Fort Lauderdale account for 38% of the projects and 56% of all condo units in the pipeline.  Oceanside, Casino and Theme Park markets along with a select few urban centers are the preferred locations.
 
New Openings for Hotels With Private Residences Will Also Accelerate
 
Ford also stated, “For hotels planning Private Residences, there are a total of 150 projects in the pipeline; 51 are Under Construction, 57 are Scheduled to Start Construction in the Next 12 Months while 42 are in Early Planning.”
 
Ford explained, “Most of these projects are in the upscale and luxury segments and are located in the urban centers of major cities.  Collectively, Boston, Chicago, Miami, New York, Orlando and Seattle, account for 53% of all planned Hotel Residences.  
 
While the project count in the pipeline is nearly the same as for Condo Hotels, the forecasted pace for New Openings will lag behind by about 6 months.  13 projects will open in the second half of ’06, 34 in ’07 and 49 in ’08.  In total through ’08, LE forecasts that 96 projects will open having a total of 18,228 Private Residences along with 17,452 developer owned guest rooms.”
 
Current Pipeline Totals are at Cyclical Peaks and are Set to Decline
 
Arising in response to strict lending requirements this decade, Condo Hotels and hotels with a residential component quickly became the favored strategy for high end hotel development in both resort destinations and urban centers.  These financing concepts enhance a projects feasibility by providing early cash streams to developers which makes financing easier and lowers carrying costs over the life of the developer’s loan.
 
Ford mentioned, “Because the post 9/11 economic recovery was fueled by record low interest rates, which led to a residential and second home real estate boom, both of these investment concepts gained an early and enthusiastic response from consumers.  Seemingly talked about and pre-marketed for a long time, these projects are just now beginning to flow from the pipeline in large numbers as New Openings and will continue to do so through ’08 as the current pipeline unfolds.”
 
However, due to rising construction costs, escalating interest rates, the onstart of an economic slowdown, and deteriorating residential and second home real estate markets, LE now expects a rapid fall off of New Project Announcements and a corresponding decline of project counts in these sectors for the remainder of the cycle as developers and lenders turn cautious.
 
Against a backdrop of over-heated development for regular residential condominiums in vacation markets like Orlando, Oahu, Las Vegas, Miami and Ft. Lauderdale as well as the urban centers of New York, Boston, San Diego, and Seattle LE expects consumer demand to be curtailed resulting in some downsizing or the outright cancellation of projects in the current pipeline that haven’t yet started construction or attained financing.  Developers will also tinker with their product mix of owned guest rooms, condo units, and private residences as they adjust their original plans to rapidly changing conditions in local markets.
 
New Openings for Timeshare and Fractionals Will be More Evenly Dispersed
 
Ford indicated, “There are 133 Timeshare and/or Fractional projects in the current pipeline.  66 are dedicated Timeshare projects, 34 are New Construction projects while 32 represent the continued “build out” of existing operations.  
 
32 of the 133 projects are dedicated Fractional projects, mostly located in upscale resort locations.  
 
Another 35 are hotel projects which plan a mix of Timeshare and/or Fractional units in addition to their conventional guestrooms.  18 are New Construction while 17 represent New Additions and/or Conversions of existing guestrooms in hotels that are already Open and Operating.  Conversion activity is particularly strong in older, well established resorts with excess land where owners are rushing to redevelop and modernize their facilities to attract new clientele so as to effectively compete with the more contemporary mega resorts coming on line.
 
In aggregate there are 19,142 Timeshare units and 3,745 Fractional units in the pipeline being actively pursued by developers.  LE forecasts that in the last half of ’06 a total of 2,747 new Timeshare units and 346 Fractional units will open.  4,922 Timeshares and 856 Fractionals will open in ’07 and 4,955 Timeshares and 1,758 Fractionals in ’08.  The vacation states of California, Florida, Colorado, Nevada and Hawaii have 50% of all timeshare development.  Oceanside, theme parks, casino destinations, golf and ski destinations are the prime locations.
 
Summary
 
Counts in the Development Pipeline for projects that involve direct consumer investment – Condo Hotels, Hotels with Private Residences, Timeshare and Vacation Club programs – are at a peak for this cycle.
 
Each pipeline sector is set to unfold at a quickened pace over the next 30 months.  Overall, guestroom supply increases will be moderate with the exception of a few over active markets.  New Supply increases should be absorbed into ’08 without major falloffs from recent cyclical occupancy peaks, if lodging demand continues to grow as expected, albeit at a slower pace and is not seriously impacted by the economic slowdown ahead.
 
LE expects New Project Announcements into the pipeline to falloff as both lenders and developers turn cautious responding to rising interest rates, a slower economy, escalating construction costs and decreased demand by consumers for lodging related investments.  In urban centers, consumer demand for these investments follows residential demand.  For condo hotels and timeshare projects in resort areas, demand tracks second home purchases.  Both demand patterns crested in ’05, have begun to fall and are not expected to bounce back for a while.
 

Lodging Econometrics (LE) of Portsmouth, NH is the industry authority for hotel real estate.  LE’s Development Pipeline databases contain individual project records for Hotel, Condo Hotel and Timeshare development worldwide. To learn more about LE’s products and services or to inquire about ordering a customized report, please visit them online at www.lodging-econometrics.com or call (603) 431-8740, ext. 25. 
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Contact:

Jen Niles
Phone: (603) 431-8740 ext. 25
jniles@Lodging-econometrics.com
 

Also See: The Lodging Development Pipeline is Rapidly Accelerating; Construction Pipeline Grows to 3,067 Projects Having 415,977 rooms / January 2006
Development Activity for Condo Hotels, Timeshares and Hotels with Private Residences a Significant Factor in the Lodging Industry’s Growth for ’06, ’07 and ’08 / December 2005

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