Report: Expect Steep Rise in US Hotel Construction

PORTSMOUTH, NH-The US lodging sector should expect 159,000 hotel rooms to come on line in 2009–about a 3% net gain in units–according to a new report by Lodging Econometrics. While the locally based tracker of global hospitality trends says the improving economy should offset new inventory this year and next, LE president Patrick Ford warns that a continuation of the super-heated construction cycle could eventually spell trouble.

“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.