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Hotel Development Dives Across Globe

'The slowdown (in construction) is happening everywhere.'

By Maria Wood | Updated on January 09, 2009

As the financing freeze spreads across the globe, hotel development has come to a virtual halt. Even areas that were once considered immune from the global credit crisis, such as the Middle East, are beginning to witness a diminished pipeline.

In its Q3 ’08 report on Europe, the Middle East and Africa, Portsmouth, NH-based Lodging Econometrics counted a total construction pipeline of 1,656 projects with 358,067 rooms, a drop of 6% and 4%, respectively, from what it terms a cyclical peak in the second quarter of last year. Of those three separate regions, the Middle East registered the smallest drop-off, a 3% decline in both projects (556 down to 541) and rooms (164,259 down to 159,690) between the second and third quarters of 2008. (The total pipeline calculation includes projects under construction, those scheduled to start in the next 12 months and deals in the early planning stages.)

Yet LE president Patrick Ford says the region will soon witness the impact of the credit crunch, albeit later than other parts of the world. “The Middle East is the last area of the world to feel the banking crisis,” he says. “For a long period of time, the banking community in the Middle East was thought to be self-contained. But recently, there has been a pullout by a lot of international bank funds and as a result, the Middle East now has the same lending difficulties that other parts of the world have.”

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