Positive Outlooks Seen for Business Travel, Hotel Project Pipeline

NEW YORK—Whether it’s embracing dynamic pricing structures, consolidation of smaller hotels into stronger brands or incentivizing customers with gift cards and loyalty rewards, the hotel industry is rallying against disrupters such as Airbnb and Yapta, according to travel giant American Express. And its just-released 2018 Global Business Travel Forecast (which looks at air, hotel and rental-car activity) analyzes how these efforts are expected to pay off for hotels and the travel industry as a whole.

In the U.S., the political climate and its impact on foreign travelers will largely influence the hotel industry’s growth prospects, according to the report. Supply will continue to grow, but at a moderate pace compared to last year, while hotel rates will remain steady against flat demand.

The outlook for international business travel is generally optimistic, according to the forecast, which is published by American Express Global Business Travel (GBT), with demand being driven by a steadily improving global economy and growing confidence among the business and investor communities.

Demand for business travel started to rebound last year, and is expected to grow over the next 12 months, with some notable gains expected in Europe and Asia, the report indicates, adding that China and India’s  economies once again lead the way. However, prices will see only marginal gains, as suppliers rapidly increase capacity to meet demand as they compete for market share, according to the report.

Despite the recent economic progress made in many global marketplaces, an element of caution remains in some quarters, the forecast suggests. Geopolitical instability combined with moves by some governments toward more protectionist economic policies has generated an undercurrent of uncertainty in the business community, it notes.

In addition, hotel performance is expected to improve globally, with small-to-moderate rate increases driven by strengthening regional economies, despite robust investment in new hotel supply, the forecast notes. It adds, however, total costs should increase even further as additional ancillary fees and stricter cancellation policies are applied by many hotels looking to bolster profitability.

Lodging Econometrics Sees Growth in Construction Pipeline

In terms of hotel supply, New Hampshire-based Lodging Econometrics’ (LE) newly released data on the U.S. hotel construction pipeline shows an upward growth trend for year-end 2017.

According to LE, the pipeline stands at 5,151 projects representing 623,695 rooms, up 4% by projects year-over-year (YOY).

There are 1,544 projects representing 200,632 rooms under construction, up 2% by projects YOY. Projects scheduled to start construction in the next 12 months are at 2,101 projects representing 245,214 rooms, down 12% by projects YOY. Projects in early planning are at 1,506 projects representing 177,849 rooms, up 44% by projects YOY.

According to LE, the rapid growth of new brands announced by major franchise companies in 2017 contributed to the increase in projects in the early planning stage. The end of the year also tends to encourage developers and brands to finalize franchise construction agreements and review timelines on existing agreements, which both contribute to an uptick in early planning, the report notes.

According to analysts at Lodging Econometrics, the five U.S. markets with the largest hotel construction pipelines by project count are New York with 180 projects/30,699 rooms; Dallas with 149 projects/17,860 rooms; Houston with 146 projects/15,714 rooms; Nashville, TN, with 116 projects/15,793 rooms; and Los Angeles with 110 projects/16,733 rooms.

The LE report shows New York has the most new-hotel openings forecast for 2018 with 57 hotels/9,534 rooms; then Dallas, which is expected to open 34 hotels/3,841 rooms; followed by Houston with 31 hotels/3,113 rooms.

New York also is forecast to open the most hotels in 2019 with 37 projects/4,601 rooms, followed closely by Houston, TX with 36 projects/4,381 rooms expected to open next year.

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