BITAC Suppliers Gleeful at Hearty Hotel Construction Pipeline

More than 5,800 hotels are under development in the US, a number that should maintain industry healt

• 
  SAVE
• 
  SHARE
• 
  TEXT SIZE
• 
  PRINT
• 
  COMMENT
• 
  PDF

. October 14, 2008

JULY 21, 2008. Though many in the hotel business have been running scared as the American consumer's confidence plummets, more evidence is mounting that Chicken Little-style panicking isn't necessary in regards to the state of the hotel industry. In fact, it's looking as if this downturn is more of a slowdown than a reversal of fortune.

And since Americans feel it's their right to take vacations, everywhere you look people are traveling, even if they are sticking closer to home because of rising gas prices. OK, occupancy may be wavering somewhat, but those rooms that are booked are filled with people paying higher rates than ever before in many instances.

Additionally, the hotel construction pipeline is robust but right-sized. It's a phenomenon that bodes well for the future health of the hotel business. At last week's Buyer Interactive Trade Alliance and Conference Purchasing and Design East conference (BITAC), presented by Hotel Interactive and held at the luxurious Grand Floridian Resort & Spa, attendees left their fortune cookies and tea leaves behind in favor of getting the inside scoop on current and future lodging industry fundamentals.

Though buyers were busy hammering out deals at the recently ended BITAC event to fill their new and under construction hotel with goods, suppliers were also happy to hear this good news from Bruce Ford, SVP Sales with Lodging Econometrics: "The economic picture is that the lodging industry is very healthy. I would start to warm up your leads, find decision makers and get to work," he said. Good thing these suppliers were at an event that put them directly in contact with some of the industry top purchasing decision makers.

The sheer number of projects in the pipeline bodes well for industry suppliers. According to Lodging Econometrics (LE), a firm that tracks all new and planned hotel construction and renovations globally, there are 5,807 hotel projects totaling 783,000 hotel rooms in the construction pipeline here in the United States, which includes those properties under construction, starting in the next 12 months or in the early planning stages. It's the fifth year in a row of year-over-year increases, which has risen in room construction from 258,000 in 2003 to 530,000 in 2006 and 718,000 in 2007.

"In terms of new construction we are opening 135,000 rooms this year. It's the most since 2000," said Ford. "Next year we are going to open 165,000 rooms. This is still not a lot."

Since 2004, when the hotel industry opened just 58,000 hotel rooms because of the stop in construction following the 2001 terrorist attacks, the number of hotel room openings has been rising steadily. In 2005 71,000 rooms opened, and 79,000 and 101,000 opened in 2006 and 2007, respectively.

By company, InterContinental Hotels Group (IHG), according to LE, has the most projects in the construction pipeline, mostly because of its incredibly successful Holiday Inn Express product. In all, the company has nine brands with 1,199 projects in the pipeline with a total of 127,087 rooms. That's enough to account for 20.6 percent of the overall pipeline. Choice Hotels International's 12 brands have 17.1 percent of the total construction pipeline with 995 hotels totaling 80,433. Hilton is third with 10 brands and 788 projects (95,743 rooms) in the works and has 13.6 percent of the pipeline. Behind them are Marriott and Starwood.

In all, it is select service hotels that continue to be most built. Not only are these hotels easier to finance and build compared to their full service brethren, but customers seem to like it. "Select service dominates," said Ford. "They have meal space but do not serve three meals. But mostly, the business traveler has become accustomed to the amenities and [consumers] like these hotels."

Though the United States still has more projects than any other, there are great deals for suppliers to make around the globe, said Peter Schor, Dynamic Results, Inc, an international hotel consultant and magazine columnist. "Manufacturers from the United States should look for lucrative opportunities throughout the world in places like China, Dubai, and many other regions," said Schor, adding that times are strong for the U.S.-based hotel operator too. "Hoteliers, along with the travel industry, should see a great increase in international travelers coming here due to the value of the lowering of our dollar. Due to some changing of law, there will be 1 million+ travelers coming to the USA from China, alone."