Hotel Online  Special Report



Hotel Construction Pipeline Up Slightly
for 1st Quarter 2004;
Marriott the Largest in Both New Construction and Conversion/Reflagging
Activity, at 48,109 rooms in 312 Hotels
PORTSMOUTH, NH –April  21, 2004 -  In its latest Quarterly Report on Lodging Development Trends, Lodging Econometrics’ (LE) reports that although the New Construction Pipeline saw a slight increase in 1Q04 of 4.1% over 4Q03, the Pipeline is still in a bottoming formation.  Year-over-Year, the Pipeline is down 12 projects and 11,310 rooms.

Patrick Ford, President, stated that LE’s beginning-of-the-year forecast of a net new supply increase of 1.2% for ’04 and 1.3% for ’05 is still on track.  Latest revisions call for 62,005 rooms to be added in ’04 and 71,039 in ’05, both below the 73,149 rooms added in ’03.

A slowdown in project migration from Under Construction to New Openings – LE forecasted 14,000 New Guestroom Openings in 1Q.  Due to adverse weather conditions in different areas of the country, only 98 hotels/10,263 rooms opened – a low count not seen since the early 1990’s. 

New Project Announcements in Las Vegas – in 1Q, the Palazzo Casino entered the Pipeline with 3,020 rooms.  Three other Independent hotels were also announced totaling 2,142 rooms. 

New Construction Announcements for the Quarter totaled 261 projects/31,533 rooms.  In addition to the 4 projects/5,162 rooms in Las Vegas, other significant Announcements were:  a new, as-yet unnamed convention center hotel in San Antonio with 1,200 rooms and another in Pittsburgh with 500 rooms; a 500-room Hyatt near Austin, TX, and two new W Hotels in Dallas and Atlanta totaling 483 rooms.

Ford noted some interesting trends:  “Full-service hotels are smaller, in suburban locations, and if in CBD locations, are generally in secondary markets.  With financing more widely available, a number of smaller limited-service franchised projects, many as small as 60-80 rooms, are being announced in secondary and tertiary markets – both in suburban and highway locations.  Project size continues to decline, as the average-sized hotel Under Construction is now 115 rooms and falling – down 15% from a high of 135 rooms two years ago.”

At 1Q04, Marriott has the largest Development Pipeline, both New Construction and Conversion/Reflagging activity, at 48,109 rooms in 312 hotels, representing 17% of all Industry guestroom development.  Hilton follows with fewer rooms, 40,434, but slightly more hotels, 332.  Hilton accounts for 14% of the Industry’s development, followed by InterContinental and Cendant at 12% each.

“Franchise sales teams continue to concentrate on Conversion/Reflagging opportunities,” Ford said, “which will increase as the Industry progresses further into the consolidation phase of the Real Estate Cycle.  Merger activity, and individual and portfolio transactions are expected to quicken, providing many more rebranding opportunities ahead.”

In a growing trend, Marriott has 29 Conversion/Reflagging projects with 6,204 rooms in its Development Pipeline, representing some 18% of its total development activity.  Hilton has 12 hotels/2,679 rooms for 8% of its activity.  By far, the leaders are Choice and Cendant with 29% and 23% of their respective development being Conversion/Reflagging activity.

LE’s Quarterly Trend Report illustrates that New Construction Announcements are not expected to grow significantly for a while longer.  Developers still await additional job growth in the economy to trigger increases in travel.  Higher occupancies and more evidence of pricing improvement are required before another Construction Cycle starts anew, perhaps in late Fall ’04, or in early ’05.

Lodging Econometrics (LE), of Portsmouth, NH is the industry authority for hotel real estate, offering three suites of Supply Side Forecast and Trend Reports updated each quarter:  An Industry-wide Forecast by Chain Scale, A Capstone Forecast for all 197 Markets and 593 Market Tracts throughout the country and Projected Growth Rates for every Lodging Brand and Company.  LE also provides comprehensive Individual Project Records for over 65,000 hotels throughout the country in a series of Development Pipeline, Census of Open and Operating Hotels, Sales Comparables, and Sales and Pricing Trend Reports.

Amy Hauck
Phone: (603) 431-8740 ext. 25

Also See: New Guestroom Supply Additions for ‘04 and ‘05 Expected to be Below ’03 Levels; Falling Supply Good News for the Industry / January 2004
Hotel Developers Reacting to the Slower Than Hoped For Recovery / Lodging Econometrics / July 2003

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