Hotel Online  Special Report

Net New Supply Growth for all 50 States
Expected at 1.2% in 2004
New Hotel Openings in the Last 12 Months Totaled 131 hotels
/ 22,997 rooms – the Lowest Number in the Top 25 Markets
Since the Mid-‘90’s / Lodging Econometrics


PORTSMOUTH, NH – July 29, 2004 - Lodging Econometrics (LE), as part of its 2Q 04 report to the Industry, re-forecasted Supply Side Growth for all 50 states, 197 markets and 593 market tracts throughout the country.  Although the early stage of a New Construction Cycle has already begun, LE confirmed that its beginning of the year estimate for near-term hotel openings remains intact.  Industry-wide net new supply growth will be 1.2% in 2004, and 1.3% in 2005.

Patrick Ford, President, stated that Supply Side Growth for the near term is benign throughout the country.  “Of the nine regions of the country, only one – the West South Central at 2.3% – will show supply growth in excess of a minimal 2% threshold for ’04.  The West South Central will have a growth rate of 2.4% in ’05, and the East South Central, 2.1%.  States above the 2% threshold in these regions are Arkansas and Texas in both years, and Alabama, Mississippi and Kentucky in ’05,” he said.

Growth higher than the 2% threshold is also taking place in Connecticut, New York and New Jersey; in Washington, D.C., Virginia and Maryland; and in other states like New Mexico and Missouri.

New Supply Growth for the Top 25 Markets

“New Openings in the last 12 months totaled 131 hotels/22,997 rooms – the lowest number in the Top 25 Markets since the mid-‘90’s,” commented Ford.  “For calendar year 2004, New Openings are re-forecasted at 131 hotels with 17,325 rooms – just 28.7% of all hotel rooms expected to open nationwide.  In ’05, only 25% of Industry-wide new room openings will take place in the Top 25 Markets.”

There are only four markets that will have supply growth in excess of the minimal 2% threshold in ’04:  St. Louis, Houston, San Diego, and Washington, D.C.  Only five markets are likely to exceed 2% growth in ’05:  St. Louis and Washington, D.C., along with Dallas, Norfolk, and Tampa.

A continued decline in Supply Growth in the Top 25 Markets is good news for the Industry.  These markets are important drivers of the Industry’s recovery.  They are the nation’s largest business centers and have a mix of both domestic and international leisure travel.  They have the largest number of Open and Operating Hotels, and with both supply falling and demand growing at a faster clip than the rest of the country, they are enjoying strong operational improvements in Occupancy, Average Daily Rate and RevPAR – ratcheting forward Industry-wide Operating Statistics.

LE Re-projects Operating Performance for the Top 25 Markets

Ford remarked that better than expected business demand, strong tourist travel, and the ability to increase guestroom rates are creating revenue improvements at a quicker-than-anticipated pace.  He said, “All 25 Markets have demand growing faster than supply and all but Chicago, with just a minimal fall-off, are showing positive RevPAR growth.”  Nine of the markets are enjoying healthy double-digit RevPAR increases.

As a result, LE has reclassified four of the Top 25 Markets upward from its beginning-of-the-year Operating Performance projections.  Three have been downgraded.

LE’s 2Q report projects that eight markets will Outperform Industry-wide Operating Trends over the next 24 months: 

Los Angeles, 
New York, 
Phoenix and 
Washington, D.C. 
Joining them this quarter is Orlando, which had a stellar first half and has minimal New Supply scheduled for ’04 and ’05.  Norfolk, which was originally forecasted as an Outperforming market has been downgraded.  “Demand never grew at the pace anticipated when the military buildup first began,” explained Ford.

Norfolk now becomes part of a group expected to Model Industry-wide Operating Trends that also includes Atlanta, Boston, Dallas, Houston, Minneapolis, New Orleans, Philadelphia, San Diego, San Francisco, Seattle, and Tampa.  Ford said, “Boston, Atlanta, and Houston were upgraded from Underperforming markets.  Boston has seen improvements in demand and is expected to have a strong summer because of the Democratic National Convention.  Houston’s demand has been robust enough to absorb prior new supply additions.  And Atlanta, while seeing only modest operating improvements, is performing well enough to no longer be classified as an Underperforming market.”

The markets expected to Underperform Industry-wide Operating Trends are:

Nashville and 
St. Louis. 
“Both Chicago and Nashville were downgraded to Underperform because demand has not shown sufficient strength to comfortably absorb supply increases that came on-board earlier in the decade,” said Ford.

Lodging Econometrics (LE), of Portsmouth, NH, the Industry authority for hotel real estate, produces the Lodging Development Forecast and Trends Report each quarter that provides comprehensive commentary on the latest Industry-wide Development Trends and a revised Supply Side Forecast of the Lodging Industry by Chain Scale, for the Top 25 Markets and for the Industry’s Leading Companies.

LE also forecasts Supply Side Growth for all 50 states/197 markets/593 market tracts in the country, updates them quarterly, and re-projects which of the Top Markets will Outperform, Underperform, or Model Industry-wide Operating Trends.  LE can customize reports for any combination of markets in a company’s portfolio and include other markets of interest as well.

Additionally, LE provides comprehensive Individual Project and Contact Records for over 65,000 hotels throughout the country in a series of customized Development Pipeline, Census of Open and Operating Hotels, Sales Comps, and Sales and Pricing Trend Reports.

To receive LE’s Lodging Development Forecast and Trends Report for 2Q 04, and for the next three quarters hereafter; to customize a Supply Side Forecast and Trends Report including any series of markets important to your company; or to inquire about LE’s other products and services, please call (603) 431-8740, ext. 25 or visit LE online at


Lodging Econometrics
Amy Hauck
Phone: (603) 431-8740 ext. 19
Also See: Eight Markets Likely to Outperform the U.S. Hotel Industry’s Improving Operating Trends in ’04, Lodging Econometrics Supply Side Forecast / May 2004
New Guestroom Supply Additions for ‘04 and ‘05 Expected to be Below ’03 Levels; Falling Supply Good News for the Industry / January 2004

To search Hotel Online data base of News and Trends Go to Hotel.Online Search

Home | Welcome! | Hospitality News | Classifieds | Catalogs & Pricing | Viewpoint Forum | Ideas/Trends
Please contact Hotel.Online with your comments and suggestions.