Hotel Construction Jumps, Openings Dip

IRVINE, CA-California hotel developers started more new rooms in 2006 than they did in 2005, but the number of new rooms that actually opened during the year declined, according to a new report by Atlas Hospitality Group. Alan Reay, president of Atlas, says that the number of rooms under development in 2006 “tops the list for the highest number of hotel rooms we have ever seen under construction” in the 10 years that Atlas has been conducting the survey.

Reay comments that the surge in construction is “a sign of how well the California hotel market is doing,” with lenders and developers both bullish on the state’s hospitality market. The number of new rooms under construction soared 68% to 13,341, according to the report, but new openings dropped by 15% to 3,265.

The boom in construction “is also a good indication of how high sales prices are on existing hotels, which makes the option of new construction much more appealing,” Reay says. “We believe that California is just now making up for many years of very little new construction” and that the new supply will be readily absorbed, Reay adds.