"The question moving forward is whether there will be sufficient demand growth generated by a modestly improving economy to offset some of the new supply that is surely coming," says Ford. "If there is an early disconnect, there could be significant supply/demand imbalances in some markets, putting pressure on rates that in turn could impact projected industry wide profitability."

LE data shows that more than 100,000 rooms will come on line annually through 2009 after just 78,871 rooms were delivered in 2006. The number of projects completed will exceed 1,000 in each of the next three years, well above the 734 opening in 2006 and the 657 in 2005. Favorable financing and the resilient economy are combining to advance new construction, and Ford indicates that upbeat market conditions and forecasts of record profitability are also contributing. Ford calls the environment "a golden time for lodging development," estimating that 340 new projects broke ground in the first quarter, ventures accounting for nearly 49,000 rooms. That represents a 41% boost compared to the previous quarter, and the figure is up 35% year-over-year.

The gross growth rate of hotels by 2009 will be 3.3%, but the net gain will be slightly less due to anticipated removal of some existing units from the inventory. The gross growth rate for 2007 is 2.2%, LE estimates, followed by 2.9% anticipated for 2008. In the first half of the year, the total pipeline was up 15% to 81,403 rooms in 643 projects. That activity brings the supply chain to a cyclical high of 4,636 new hotels and more than 611,000 rooms.