LE�s Forecast for New Hotel Openings

In Q1, 16 hotels/2,189 rooms opened. LE�s latest Forecast for New Hotel Openings calls for 79 projects with 13,912 rooms to open during the last three quarters of 2008, while 107 projects/22,947 rooms are anticipated for 2009. With 158 projects/34,084 rooms, or 85% of the expected projects already Under Construction, the Pipeline is unfolding at a quickening pace. 

A Showcase Region for High-End Global Brands

Global companies have a large presence and are putting their more opulent resort offerings in the spotlight here. InterContinental has 2 luxury InterContinentals underway and 5 Crowne Plaza projects with 1,013 rooms under development. Marriott International�s pipeline features 7 Ritz-Carltons and 3 JW Marriott luxury hotels, with 4 Marriotts and 2 Renaissance Hotels. Starwood Hotels & Resorts has 2 Luxury Collection properties and 5 St. Regis, along with 5 Westins, 2 Le Meridiens and 1 Sheraton Hotel. Hilton Hotels has 1 Conrad Hotel and 3 Hilton Hotels.

Although high-end brands from Marriott, InterContinental, Hilton and Starwood have solid pipelines, the region is a favorite for other global companies and their investor groups as well. Over a dozen global luxury brands located outside of the Americas are in various stages of development throughout the region, including Banyan Tree, Mandarin Oriental, Angsana Resorts & Spas, Amanresorts, Jumeirah, Raffles, and Capella. 

There is considerable development of mid-market and select-service branded projects in the region, approximately 70% of which are in Mexico, particularly in secondary and tertiary cities. InterContinental�s Holiday Inn, with 16 projects, and Holiday Inn Express, with 39 projects, are the leaders. Marriott�s Courtyard follows with 8 projects, while Hilton�s Hampton Inns & Suites has 6 projects. Grupo Posadas has 10 projects/1,279 rooms in the Pipeline, 4 of which are the economy One Hotels brand.

Leading Countries and Markets

The Pipeline for Mexico leads with 136 projects having a total of 25,610 rooms, representing 44% of the project total for the region. Three of Mexico�s principal beachfront areas, Los Cabos, Cancun, and Playa del Carmen, make up a combined 15 projects/2,695, while Mexico City has 8 projects/1,209 rooms.

The Caribbean has 127 projects/30,173 rooms, with Puerto Rico, at 23 projects/4,887 rooms, the Dominican Republic, at 15 projects/6,081 rooms, and Netherlands Antilles, with 13 projects/2,938 rooms, having the largest pipelines. Among the key markets are San Juan, Puerto Rico, with 10 projects/2,181 rooms, Punta Cana, Dominican Republic, with 6 projects/3,817 rooms, and Willemstad, Netherlands Antilles, with 10 projects/2,183 rooms. 

Cuba could soon emerge as a major development hub in the Caribbean, as the Tourism Ministry�s recently announced a two-year plan to build 30 hotels with a total of 10,000 new rooms through a series of joint ventures with companies from Spain and China. 

Of Central America�s 48 projects/9,009 rooms, 23 projects/4,565 rooms are in Costa Rica and 18 projects/3,312 rooms are in development in Panama, including 13 projects/2,113 rooms in Panama City.
 
Full-Service Segments Enjoy Prominence
 
Of the 65,332 rooms in the total Pipeline, 12,401 rooms are in the Luxury segment and 9,311 rooms are in Upper Upscale. Independents make up another 34%, with 93 projects/22,276 rooms. About 50% of the Independent total is anticipated to become a Luxury or Upper Upscale brand as many developers will likely choose a brand as their project planning progresses. Select and limited service sectors, at 32%, make up the remaining Pipeline. 

Of the 153 Luxury, Upper Upscale and like-kind Independents in the Pipeline, 70 projects have a residential component. This includes 28 projects with condo hotel units, 34 with private residences and 8 with both. It is important to note that, in the last two quarters, there have been fewer New Project Announcements into the Pipeline with a condo or residential component. This may be a reflection of the slower US economy, greater difficulty in obtaining financing, and perhaps the bad publicity of some failed projects Stateside.

Developers Display Some Caution 

The region�s economies have been growing through the decade, reaching unusually high peaks through the end of 2007 and into early 2008. However, as various media and institutional reports suggest, there is growing concern that a slowdown could develop. Several dynamics fuel this sense of apprehension: the slowdown in the global economy, particularly in the US; the tightening availability of credit in North America and Europe; escalating oil and energy costs, etc. However, despite this sense of foreboding, no substantial changes have surfaced yet.

Hotel operating results have been strong. Tourism statistics for the region for early 2008 indicate that inbound traffic increased year-over-year. However, developers are fully aware that, should the US economic situation linger and the region�s economy start to slow down, reduced guestroom demand and softening room rates are likely. Again, nothing of significance has occurred yet.

Still, developers may already be buffering themselves from a possible impact. New Projects Announcements into the Pipeline have been slowing for three consecutive quarters, with just 35 new projects/6,567 rooms announced during Q1 2008. 

Construction Starts in the first quarter were at a four-quarter low at 28 projects/5,158 rooms, meaning projects are now slow to move forward in the current Pipeline. 

Postponements and Cancellations in Q1 2008 were high at 17 projects/3,513 rooms. Much of this is due to the termination of the Harrah�s Entertainment and Baha Mar Resorts Ltd. joint venture to develop a new gaming destination in Nassau, Bahamas, that included a 1,000-room Caesars Resort Hotel & Casino. As a result of the termination, three Starwood projects related to the development have also been put on hold, including a St. Regis, a W Hotel and a Westin with a total of 1,024 rooms. Baha Mar Resorts is still committed to the project and is said to be exploring other options.

Summary

It is true that there is a sense of unease, with concerns of a possible slowdown in regional economies and the lodging industry. However, this has not yet happened, as the region is enjoying good success. 

With New Hotel Openings from the existing Pipeline set to escalate in 2008 and 2009, developers seem to be preparing for what could come, as seen in the decrease of New Project Announcements into the Pipeline. The fall-off in Construction Starts in Q1 demonstrates the slowing progression of projects up the current Pipeline. 

The overall mood is optimistic, but a bit cautious. It will be interesting to see how the situation develops and what trends emerge.
 
Lodging Econometrics (LE) of Portsmouth, NH is the global authority for hotel real estate. LE conducts Supply Side research for all markets, developers, companies and brands � worldwide!

To learn more about products and services, please contact LE at +1 603-431-8740 ext. 25 or email  [email protected]

© 2008 Lodging Econometrics

Kathleen Hurley
Phone: +1 603-431-8740 ext. 12
Email: [email protected]