Friday August 21st, 2009 - 9:58AM
In the midst of the most severe downturn the global hotel industry has experienced in decades, new room supply would seemingly be anathema to hotel operators and brand leaders alike. However, with owners planning for the inevitable upturn, replacement of obsolete product and strategic positioning for long-term brand dominance means that—as long as financing is available—new hotel rooms will continue to open, though likely at a somewhat slower pace in the near-term.
Smith Travel Research’s global hotel pipeline database contains 449,000 hotel rooms currently under construction around the world. The Americas region leads the way with 175,109 rooms (38% of the total) under construction followed closely by the Asia-Pacific region with 153,287 under construction rooms (35%). We’ll briefly recap the hotel construction pipeline in each region around the world.
Among the four global regions tracked by STR, the European region has the lowest number of hotel rooms currently under construction at 45,389. The United Kingdom leads in rooms under construction at just under 8,908, which represents about 2% of the existing UK room supply. Germany (6,633 rooms under construction) and Russia (5,692) round out the top three positions in the European region. Not surprisingly, Moscow, London and Berlin lead all markets in the region based on projects in the “active” development pipeline, which includes projects under construction and in final planning and planning stages. Economy and upscale chains account for most hotel rooms in the active European pipeline with a little less than 45,000 rooms.
The Asia-Pacific region will likely be the engine that powers the global lodging industry’s growth for years to come. China dominates the region’s pipeline and accounts for one-half of the rooms under construction or about 78,000 in the region. India and Thailand combine to account for a little less than 37,000 rooms in-construction. China, India and Thailand combine to account for 80% of the region’s 153,287 rooms under construction.
Luxury, upper upscale and upscale brands dominate the active development pipeline in this region, with more than 146,000 rooms or 64% of the total active pipeline. In the run-up to last summer’s Olympic games, Beijing opened 34 hotels with slightly less than 11,000 rooms. Today, the Shanghai, China; Mumbai, India; and Bangkok, Thailand markets lead the region based on number of rooms in the active pipeline.
High-end development dominates the Middle East & Africa regions. The United Arab Emirates leads the region with nearly 33,717 rooms currently under construction. Dubai, United Arab Emirates—“the city of cranes”—accounts for half this total and Abu Dhabi, UAE, accounts for another 33%. Saudi Arabia is a distant second with roughly 7,000 rooms under construction and nearly 5,000 additional rooms in the final planning or planning stages.
Not surprisingly, the U.S. dominates development in the Americas region with roughly 149,000 rooms currently under construction or about 85% of the region’s total. Upscale and midscale without food and beverage chains account for most of the U.S. construction numbers. The 10 U.S. markets with the highest number of rooms currently under construction account for about 50,000 rooms or one-third of the total U.S. construction activity.
New property development is the lifeblood of hotel companies around the world. Obviously, new projects must be balanced against performance of the existing hotel stock and the potential for future new demand. In today’s depressed operating environment, development numbers are slowing in most markets around the globe, but there are exceptions. Look for the pace of hotel development to pick up as access to financing improves and the operating environment returns to health.
Duane Vinson is vp of content management at Smith Travel Research