October 2012 - Asia Pacific Pipeline totals, standing at 2,317 projects/ 561,696 rooms, hit an all-time high at the end of 2Q.  There are 1,646 projects already Under Construction, representing a very high 71% of total Pipeline projects, as both Construction Starts and New Project Announcements into the Pipeline have remained strong.
 
Throughout the Asia Pacific region, there has been a rush to get development projects funded and into the ground in anticipation of the longer-term effects of the economic slowdown, underway since the second half of 2011.  Nonetheless, the region still represents the greatest growth potential available for global franchise companies.  The region accounts for a whopping 44% of all rooms and a third of all projects in the current global Pipeline.

China has the largest Pipeline in the world, by room count.  At 406,480 rooms, China accounts for a third of all global rooms under development.  With 1,502 Pipeline projects, China is second only to the United States.  Projects and rooms already Under Construction, as well as Construction Starts, were at all time highs in Q1, as were total rooms in the Pipeline.  The three metrics tailed a bit in Q2, indicating the likely onset of a new downtrend from the development peak caused by the long anticipated global slowdown.  New Hotel Openings peaked in 2010 at 966 hotels/ 136,812 rooms as a longer-term slowdown, albeit one with a moderately declining slope, has now set in.

 
With the economy slowing abruptly in recent months, developer sentiment is far more restrained and risk adverse than before.  The economic turmoil in Europe and a slower than expected recovery in North America are the immediate concerns.  Neither situation seems to offer China any chance for near term relief.  In response, China has initiated a flurry of new government sponsored infrastructure projects and has instructed their lending institutions to liberalize lending practices.  These stimulus remedies have worked in the past, although they can cause longer-term problems like spiraling inflation and an acceleration in debt defaults.  For sure, new government leadership coming into office next year will have additional economic stimulus at the top of their agenda too.

India’s economy has been cooling for some time.  Its Pipeline, the third largest in the world, has 379 projects/ 66,867 rooms at the end of 2Q 2012, down 5% and 10% respectively, year-over-year (YoY).  More significantly, it is down 17% for both projects and rooms since the peak set in Q4 2010.
 
While the back-end of the Pipeline has declined, counts for hotels currently Under Construction have been rather consistent for the last 10 quarters, fluctuating narrowly in a broad topping out formation.  As a result, LE’s forecast calls for an acceleration of new hotels coming online as the front end of the Pipeline begins to unfold.  83 hotels/ 14,457 rooms are scheduled to open in 2012, 72 hotels/ 13,067 rooms in 2013 and 106 hotels/ 17,982 rooms in 2014.

Despite a stalling economy, India is still looked on as a country of great opportunity, particularly for economy and midscale global brands.  Accor recently announced an aggressive plan to add 75 hotels over the next three years, while Carlson Rezidor entered into a strategic partnership to add 49 Park Inns in north and central India.  A softening economy, rising interest rates, an inadequate infrastructure and a difficult permitting and approval process make for a challenging environment for developers.

Launched in 1995 with the encouragement of Wall Street analysts and many Lodging Industry leaders, Lodging Econometrics (LE) is the recognized authority on all hotel real estate including the Development Pipeline and the Sale and Transfer of Lodging Real Estate nationwide. LE also compiles and maintains the Industry's Census of Open and Operating Hotels including the Names of Owners & Management for more than 60,000 hotels in the U.S. and Canada..