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New Hotel Construction Slows as Anticipated

NEW YORK CITY-The decline is good news, says Lodging Econometrics, because it leaves guestroom demand and pricing as the primary variables, eliminating future supply growth as a concern for the industry.

By John Howe | Updated on April 30, 2001

NEW YORK CITY-Analysis of fourth quarter 2000 lodging industry data shows that the anticipated decline in new hotel construction has occurred, the first phase in a soft landing scenario forecast by Lodging Econometrics, a research and analysis firm. During the last three months of 2000, the number of new projects and new rooms in the development pipeline has declined substantially, to a level not seen since the fourth quarter of 1998, when the Russia/Asia financial crisis took its toll on the industry.

Major contributors to this contraction are the decline in US economic performance, increased cost of construction, worries about lower capital spending by business, record levels of consumer debt and tighter lending standards. Lodging Econometrics welcomes the slowdown as a boon for the hotel industry overall because it will leave guestroom demand and pricing as the primary variables over the next three years. The firm expects this to translate into higher room occupancies and better RevPAR potential.

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