September 24, 2010 - Asia Pacific�s Total Construction Pipeline is up to 1,944 projects/473,613 rooms at the end of Q2 after five consecutive quarters of escalating project and guestroom counts. China and India, two of the world�s fastest growing economies, are the driving force behind this resurgent construction activity. Both countries� Pipelines receded only slightly from pre-recession highs. Pipeline growth has since bounced back quickly in these countries as developer sentiment is very high. It stands in contrast to still declining Pipeline trends seen in other developed economies.

China�s Total Pipeline, with 1,192 projects/ 327,459 rooms, is the highest level LE has ever recorded. It is the second largest country Pipeline in the world. Since bottoming in Q4 2008, the Pipeline has risen 27% for both projects and rooms. Project counts for Under Construction and Early Planning are also at historic highs. When the global economic crisis began, China�s government moved quickly to stimulate construction across all real estate sectors with an infusion of capital into its banking system. This encouraged more lending, halted Pipeline declines and led to a resurgence in hotel development. Both New Project Announcements into the Pipeline and Construction Starts of projects already in the Pipeline have steadily increased over the past 6 quarters, and are now at heights not seen since Q4 2007. A high 76% of Total Pipeline projects are currently Under Construction. This will lead to strong New Hotel Openings going forward. In fact, China will have the most rooms of any country in the world coming online each year through 2012 and likely beyond.
 

Global franchise companies continue to see China as a major focus of their growth initiatives. The top ten global companies alone represent 30% of total projects and 38% of rooms in the Pipeline, mostly with their Luxury, Upper Upscale and Upscale brands. China-based hotel companies, major beneficiaries of the financial stimulus program, are very active with smaller sized, Economy projects, which make up 26% of Total Pipeline projects. Development time lines for these smaller projects are significantly shorter. Many of these hotels can enter and exit the Pipeline in as little as 15 months and will therefore step up New Openings in 2010-12.

India, with a total of 439 projects/77,561 rooms, is the world�s third largest Pipeline and is growing quickly. Because of its economic strength, India�s Pipeline experienced only slight declines due to the global recession and has since rebounded. The Pipeline is expected to reach higher highs in upcoming quarters. Rising business travel demand in the country�s major cities and business centers is increasingly attractive to global franchise companies. The top ten companies currently make up 66% of projects and 71% of rooms in India�s Pipeline.

More exposed to the impact of the global economic and lending crisis, most Pipelines for countries in Southeast Asia and Other Areas continue to decline. Southeast Asia�s Total Pipeline is at 232 projects/52,598 rooms, and Other Areas, at 81 projects/15,995 rooms. A high number of projects are Under Construction and are set to exit the Pipeline through 2012. This, as well as low New Project Announcements, will draw down Pipeline totals through mid-decade.

LE�S FORECAST FOR NEW HOTEL OPENINGS

With China�s Pipeline growing rapidly, the country�s New Hotel Openings are set to come online at a strong pace. LE�s first time Forecast for 2012 indicates that 292 hotels/ 95,415 rooms are expected to open. LE has also revised its Forecasts upward to 359 hotels/84,101 rooms in 2011, and 612 hotels/99,163 rooms in 2010. These revisions reflect a flood of small, Economy hotels set to exit the Pipeline in 2010 and 2011, while a significant number of larger, upper-tier projects, whose construction time lines were extended because of the recession, are now expected to open in 2011 and 2012.

Strong Pipeline activity in India will also result in sizeable year-over-year increases in New Hotel Openings, which are forecasted to reach a historic high of 105 hotels/21,407 rooms in 2012. This will be preceded by 77 hotels/11,815 rooms in 2010 and 80 hotels/13,427 rooms in 2011. Accelerated hotel construction, particularly with global franchise brands, will keep the country�s Pipeline growth on an upward trajectory and lead to increasingly higher New Hotel Openings beyond 2012.