In Europe, new project openings peaked in Q2 2008 at 312 hotels with 43,219 rooms. In 2009, LE forecasts 251 hotels with 36,974 rooms will welcome guests, followed by 230 projects/38,688 rooms opening in 2010. Yet in 2011, those numbers will decline by 36% from the Q2 '08 peak, resulting in 147 hotels with a total of 27,547 rooms being delivered.
Within the Continent, the financing freeze has hit individual countries and regions differently, notes Patrick Ford, president of locally based LE. For example, France and Germany have experienced small gains in GDP and Russia is likely to follow suit. The same cannot be said for Eastern Europe as a whole.
"Those countries depended more in global financing as opposed to domestic," Ford says. "When the recession hit and the banking crisis began, international investors and lenders went home. That part of Europe was largely dependent on cross-border financing and investment, and that dried up very quickly."
New hotel openings in the Middle East, meanwhile, are expected to reach historic highs over the next two years. This year, 75 projects/17,098 rooms are set to debut. But those numbers will surge to 106 hotels/32,860 keys in 2010 and 128 projects/35,966 rooms in 2011. Of the 477 projects in the total pipeline, which includes projects that have been announced, in early planning stages or under construction, 255, or 53%, are already under construction.
Ford attributes the active pipeline in the Middle East to the types of project going up there. Specifically, 70% of all hotels in the pipeline in that region are larger than 200 rooms. "That's very high by any standard, except in some of the large Chinese cities," he says.
Further, 77% are in the luxury, upper-upscale and upscale sectors. "In other parts of the world, it's the reverse," Ford says. "In the US, it's more of a mid-market surge."Such top-tier projects typically require longer lead times to bring out of the ground.
"These projects were seeded in the pipeline much earlier—years ago—and take a long time to develop," Ford states. "That's why the Middle East has such a high forecast for new openings in the next two years."
Home to 113 projects and 47,142 rooms, representing 32% of all guest room development in the region. Dubai is the most active market in the Middle East. Its average project size is 417 rooms, the highest for any country or market in the world.Nevertheless, the Middle East is off from the peak of Q2 '08. In that quarter, there were 566 projects with 164,250 rooms in the pipeline. In Q2 '09, the pipeline stood at 477 hotels/145,786 rooms, a drop of 16% and 11%, respectively.
New openings in Africa will top out over the next three years. In 2010, the peak will hit 56 projects with 10,373 keys. "It has a much smaller pipeline than anywhere else in the world," Ford says. "It's a developing region and there has been a lot of cross-border investment and financing. Chinese banks and investment companies are very big in Africa, but nonetheless it's still very small when you add it up."
Ford does not envision a dramatic upswing in new development in EMEA any time soon, even if global GDP improves in the third quarter. "We will be showing some year over year improvement, but it will take a considerable amount of time before the world economies are back to where they were," he says. "We need a recovery in the hotel and lending businesses globally before anyone is going to think about another development wave. There will also be a considerable amount of mergers and change of ownership in existing properties because operating results are very poor across the world. All of that has to transpire before a new development wave gets sparked again."
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