The hotel industry has seen a record number of hotel room
renovations during the past few years, which has been a great boon for industry
suppliers that were struggling to get out of the Great Recession. Here at Hotel
Interactive® we’ve been predicting that trend would eventually end and be
complemented by an uptick in new construction.
That prediction is becoming reality as the new
construction is growing at a nice pace and should help industry suppliers keep
healthy numbers as they sell to these new hotels.
This morning at BITAC® Purchasing & Design West 2014,
being held here in Las Vegas at The Mirage, we spoke with Bruce Ford, SVP
Business Development to get a sneak peak at the current state of the hotel
construction pipeline and brand new numbers from the third quarter of 2014.
“Savvy hoteliers need to anticipate what the next 12
months will look like. We are seeing high occupancy levels so banks are getting
get interested and now owners will get interested,” said Ford during this
morning’s session.
BITAC® is of course the industry leading one-on-one
meetings and relationship building event and this week Hotel Interactive® held
its 53rd BITAC® meeting. And this year’s Purchasing & Design West event is
a veritable who’s who of top industry buyers and suppliers who’ve come together
to problem solve, network, sign deals and exchange ideas that move forward the
quality of experiences for hotel guests, while adding profits to the bottom
line. There’s even time to cut loose, be social and network in a luxurious and
relaxed environment like last night when the sold out crowd got extremely rare
evening access to Siegfried and Roy’s Secret Garden where conference attendees
got to see baby White Tigers, White Lions and an amazing dolphin shows. Some
attendees even got to participate in a dolphin training session. This was only
the second tie in the history of Mirage a group got to do this unbelievable
experience.
According to Ford, financing is now available with means
not available to the average developer during the last few years. “Financing
terms are more appealing. The Fed has stayed out of it so interest rates have
stayed low. We are seeing a lot of refinancing and new construction financing.
The industry is now in expansion mode and owners are reinvesting in their
hotels,” he said.
The latest numbers from Lodging Econometrics show there
are currently 443,000 rooms representing 3,516 hotels in various stages of the
new construction pipeline as of the end of Q3 2014. That compares with 383,000
rooms in 3,020 projects at the end of 2014. Lodging Econometrics predicts the
number of projects – in a conservative estimate - will increase to 455,000
rooms in 2015, 515,000 rooms in 2016 and 585,000 rooms in 2017.
People are back to buying hotels too, with portfolio
acquisitions up. Franchise companies are also adding new brands to their mix of
offerings so they can continue selling hotel deals while they are also removing
old properties from the system in favor of new build hotels.
As of 3Q 2014 there are 1,062 hotels with 134,292 rooms
under construction. In 2Q 2014 that was 970 projects with 126,380 rooms. There
are also 1,375 hotels planning to start construction sometime during the next
12 month that have 165,085 rooms and another 1,079 hotels with 144,559 rooms
are in early planning stages.
The Upscale and Upper Midscale segments will continue to
be industry darlings and see the vast majority of development in the industry.
The Upscale segment will see 174 properties open this year, 246 in 2015 and 255
in 2016. Upper Midscale will see 262 properties debut by the end of the year
with 335 in 2015 and 366 in 2016.
The good news is demand continues to be strong which should
nicely compensate for increased hotel development for some time.
“We have four more years to go on the construction
pipeline. Don’t be concerned with over supply,” said Ford.
Source: Hotel
Interactive
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