Hotel Online  Special Report

Falling New Hotel Supply Additions in the 25 Largest
U.S. Markets Are Boosting Industry-wide
Operating Results


PORTSMOUTH, NH – February 25, 2005 - Lodging Econometrics (LE), the Industry Authority for Hotel Real Estate, has announced that in the nation’s 25 largest lodging markets, a cyclical low 122 hotels having 16,126 rooms opened in 2004 – down from 147 hotels/26,227 rooms in ’03.  The forecast for New Openings in the Top 25 Markets calls for only slight increases in ’05 to 140 hotels/18,061 rooms and to 152 hotels/19,329 rooms in ’06.

Patrick Ford, President, stated, “Such low levels of New Supply in the industry’s most important markets coupled with significant increases in Occupancy, ADR and RevPAR are leveraging positively and are driving the industry’s overall operating performance and should continue to do so over the next few years.”

Heavy Leisure Markets Are the First to Recover from 2003 Bottoms

The markets that are recovering the fastest from bottoms experienced post-9/11 are those with a higher mix of leisure over commercial travel.  These markets should continue to be strong operationally over the next two years because of continued increases in leisure travel – particularly by international tourists who see the U.S. as a terrific travel bargain due to the falling dollar.  Markets that are particularly benefiting from international travel are Anaheim, Oahu, Orlando, Miami, New York, San Francisco and Washington.

A bit slower to respond are the financial and business centers where white-collar job growth is lagging and increased corporate Merger and Acquisition activity continues to cause some job loss.  The office vacancies that this can create often serve as a drag on CBD vitality and further postpone lodging development activity.  Cities with heavy manufacturing concentrations will be the last to fully recover.

This means at least another two years of economic recovery will be required before there are new hotel construction announcements of significance in Central Business Districts (CBD’s) and the inner suburbs of our leading cities.

At Least 15 Markets Are Expected to Fully Recover by 2006

Operating results in 2004 were far better than originally forecasted, and after a detailed analysis of operating results, LE reports that Anaheim, Miami, Norfolk, Oahu, San Diego and Tampa are now fully recovered and are presently operating at their pre-9/11 peaks. Another six – Los Angeles, Orlando, Philadelphia, Phoenix, St. Louis and Washington, D.C. – are forecasted to recover to their pre-9/11 levels during 2005, followed by at least another three – Nashville, New York and Seattle – in ’06.

Operating Trends in the Top 25 Markets Are on the Upswing

After strong 2H 04 operating performance, Philadelphia, San Diego and Tampa have been added to LE’s forecasted list of Markets Expected to Outperform Industry-wide Operating Trends in ’05 and ’06.  The market leaders that will drive the recovery and are expected to outperform industry uptrends now include:  Anaheim, Los Angeles, Miami, New York, Oahu, Orlando, Philadelphia, Phoenix, San Diego, Tampa and Washington, D.C.

Markets Expected to Model Industry-wide Operating Trends in ’05 and ’06 are Boston, Minneapolis, New Orleans, San Francisco and Seattle.

Ford commented that Atlanta, Dallas and Houston had a particularly sluggish year in ’04 causing LE to reclassify those markets as Markets Expected to Underperform Industry-wide Operating Trends.  They are added to Chicago, Denver, Detroit, Nashville, Norfolk and St. Louis – all of which, although improving, struggle to keep pace with the industry’s rising operating trends.

The rate of recovery in the Top 25 Markets could quicken further if the overall pace of growth in the economy were to accelerate above present expectations.

Lodging Econometrics (LE), of Portsmouth, NH is the Industry Authority for hotel real estate and offers three suites of strategic planning and forecasting reports, updated each quarter:  A Development Forecast and Trends Report, Industry-wide by Chain Scale, for the Top 25 Markets, and for the Leading Hotel Companies; A Supply Side Forecast and Trends Report for any of 50 States, 197 Markets and 593 Market Tracts that can be customized to match any company’s portfolio; and Projected Growth Rates for every Lodging Brand and Company.  Additionally, LE produces Development Pipeline, Census of Open and Operating Hotels and Sales Comp Reports for any market in the U.S. and/or Canada. 

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
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 / April 2004

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