Sleeper_March-April

Sleeper March/April 2009
Head Ofﬁce
US Lodging Development Overview at Q4 2008
Pipeline in the US is declining at an accelerated pace according to latest ﬁgures from Lodging Econometrics
TOTAL CONSTRUCTION PIPELINE
Q4 2008 Q3 2008 Q2 2008 % CHANGE Q4 OVER Q2
PROJECTS ROOMS PROJECTS ROOMS PROJECTS ROOMS PROJECTS ROOMS
ECONOMETRICS
UNDER CONSTRUCTION 1,550 209,208 1,716 233,407 1,723 242,229 -10% -14%
STARTS NEXT 12 MONTHS 2,544 289,450 2,543 303,172 2,737 327,920 -7% -12%
LODGING
EARLY PLANNING 1,264 187,858 1,393 203,693 1,423 215,398 -11% -13%
TOTAL PIPELINE 5,358 686,516 5,652 740,272 5,883 785,547 -9% -13%
SOURCE:
56 80
140
49.6
51.9
125.4
47.1 66.5 116.6
The US Construction Pipeline totaled
43.2
44.5
58.9 102.3
42 60
105
90.8
5,358 projects/686,516 rooms at the
48.5
29.2
end of Q4. This represents a 9% decline
28
70
(000S)
40 34.3 35.4
(000S)
56.3
26.1
46.2
by projects and 13% by rooms from the
(000S)
14 20
35
cyclical peak in Q2 2008. The Pipeline is
ROOMS ROOMS
ROOMS
declining at an accelerated pace, having
0 0
0
Q3 Q4 Q1 Q2 Q3 Q4 Q3 Q4 Q1 Q2 Q3 Q4
Q3 Q4 Q1 Q2 Q3 Q4
lost nearly 100,000 rooms over the
2007 2008 2007 2008 2007 2008
past 2 quarters. This downward trend is
CONSTRUCTION STARTS (PROJECTS) CANCELLATIONS (PROJECTS) NEW PROJECT ANNOUNCEMENTS (PROJECTS)
expected to continue through 2010.
casino openings were 30 hotels/15,826 the Pipeline, 410 projects/66,481 rooms, as projects that were able to secure
With the realization that the nation’s rooms, the highest count recorded are the highest LE has recorded. The financing before lending closed down
economic and banking crises are going since Q3 1998. New Construction greatest proportion of cancellations come online. The speed with which
to be deep and prolonged, consumer projects are coming out of the Pipeline were for larger projects, casinos, and Under Construction projects are moving
and business sentiment has dampened at an accelerating pace, as there is less for nonbranded independent projects to completion has ramped up now that
considerably. Guestroom demand has pressure on the availability and cost across all chain scales. These trends are logistical pressures have eased. As a
turned negative, resulting in significant of building materials and labor crews, expected to continue until the economy result, LE has adjusted its Forecast
declines in occupancy and RevPar, and leading developers to complete projects improves and lending becomes more higher, as it is now likely that New
putting considerable pressure on room on schedule or even ahead of schedule. available. Openings will be greater than initially
rates. This is causing many developers expected. LE’s new Forecast for 2009
to retreat to the sidelines to await a KEY PIPELINE METRICS New Project Announcements now calls for 1,431 hotels/165,927
bottoming in economic conditions and Construction Starts in Q4 were (NPAs) into the Pipeline are at 485 rooms to open, a gross growth rate
a thaw in the lending environment. down to 279 projects/29,180 rooms, projects/56,345 rooms, significantly of 3.4%. In 2010, an additional 1,370
As a result, project cancellations and their lowest level since Q1 2006. Project below the cyclical peak in Q1 2008. hotels/160,885 rooms will come online,
postponements are at trend-line highs, migration up the Pipeline towards However, QoQ analysis shows a slight a gross growth 3.2%. Net growth rates
while New Project Announcements are Under Construction has essentially increase due to a rush by developers and will end approximately ± 0.2% lower
well below previous cyclical peaks. stalled due to the lack of available franchise sales teams to finalize projects after hotel closings and other removals
financing. Loans are unavailable for before the year’s end. There continues from Current Supply are compiled. LE’s
New Openings in Q4 2008 exceeded larger projects and for those requiring to be a notable upswing in lifestyle Forecast for New Hotel Openings is
expectations, with 367 hotels/43,845 a loan larger than $20 million. Smaller, branded projects, such as aloft, Edition, based on current development trends
guestrooms coming online, the highest less costly projects can be financed Indigo, Cambria Suites, and Hyatt Place. as of the end of Q4 2008. The Forecast
quarterly total since Q2 1999. This through local or regional banks, but does not account for other unforeseen
brings 2008’s total New Openings to lending conditions are strict and steep. FORECAST FOR NEW OPENINGS changes in economic or lodging
1,330 hotels/153,411 guestrooms, a gross New Openings are expected to reach operating fundamentals that would alter
growth rate of 3.2%. Of that total, new Cancellations of projects already in a cyclical high in the next two years, these trends going forward.
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