Pat Ford






CPNHospitality hotel expert Eugene Gilligan spoke with Pat Ford, president of Lodging Econometrics, about the hotel development market. The Portsmouth, N.H., lodging real estate consulting and research firm just released its hotel construction statistics for this year's first quarter.

CPNHospitality: How much hotel development is occurring, in a historical context?

Ford: The construction pipeline--which includes all projects underway, those that will begin in the next 12 months and those projects in the early planning stages--is now 3,377 projects, containing 448,156 rooms. That's just 536 projects and 97,493 (rooms) below the peak, that was reached in the third quarter of 1998.
The pipeline bottomed in the fourth quarter of 2003. The construction pipeline has increased for nine consecutive quarters and has accelerated for the last five. I expect it to exceed the peak in the last cycle in 2007 and continue to grow in 2008.

CPNHospitality: What types of hotels are most prevalent in the construction pipeline?

Ford: Development of mid-scale hotels without food and beverage is absolutely going crazy. There are 1,328 projects in the pipeline, and that's exceeded the peak of the last cycle. It's 120 percent beyond it.

CPNHospitality: Why are these types of hotels being developed?

Ford: In the early part of the development cycle, development mostly takes place in outer suburban locations and smaller cities and highway locations. Mid-scale hotels are most appropriate for these areas. Holiday Inn Express and Hampton Inn and Suites are the two brands with the most representation in the pipeline. Typically, developers find that getting financing for mid-scale hotels is relatively easy.

CPNHospitality: What is the outlook for luxury hotel development?

Ford: Luxury hotel development is strong. There are now 50 luxury hotel projects in the pipeline, and 80 percent of them have some mix of private residence, condo hotel units or fractional vacation club or timeshare interests. It's no secret why: Developers sell these units and get upfront cash. Buyers of these units like the cachet of a luxury brand. Geographically, 60 percent are in urban centers and large suburban communities and 40 percent in resort locations.

CPNHospitality: What does the urban hotel construction pipeline look like?

Ford: Urban hotel development usually comes later in the cycle, and there will be more urban development as we go through it. A trend we're seeing is select service hotels--such as Courtyard by Marriott, Residence Inn by Marriott and Hilton Garden Inn--being built in high-rise towers in center city locations. They require fairly small land parcels, have little or no meeting space, no retail space and minimal food service, which lowers construction costs. Room rates are significantly below full-service hotels.

People can fall into a trap and be alarmist about a growing construction pipeline. Hotels now in the construction pipeline will take from two to four years before a cash register rings. There is going to be a modest amount of new hotels opening in 2006 and 2007, and the number of hotels opening later may open in a healthy, growing economy. So the amount of development may not be out of line.









Links referenced within this article




Find this article at:
http://www.cpnonline.com/cpn/property_type/article_display.jsp?vnu_content_id=1002385483

Written by: No Author