Supply Forecast: More Hotels

More than 1,000 hotels will open both next year and in 2008, according to a new lodging supply forecast from Lodging Econometrics. According to the New Hampshire-based firm, 1,082 properties with 119,426 rooms will debut in ‘07, followed by 1,079 hotels and 131,517 rooms the next year.

Given the current strong health of the hotel industry, new construction has been mostly restrained, although that's beginning to change. Next year's openings will increase room supply by 2.6 percent, versus 1.6 percent in 2005 and an estimated 1.9 percent this year. (LE's estimates are gross additions to supply and don't take into account hotel closings or conversions to other real estate uses.)

Construction starts are also accelerating. In the past four quarters, construction commenced on 976 hotels with 125,540 rooms, a 50-percent year-over-year increase, reports the firm. At the end of the second quarter, the hotel development pipeline (i.e., properties under construction, scheduled to start within 12 months or in early planning), stood at 3,436 projects with 463,629 rooms.

However, it's still difficult to develop in many center cities. While the top 25 markets have about 30 percent of the industry's guestroom census, they will account for only 24 percent of new supply this year and 28 percent in ‘07. At the end of the second quarter, Washington DC had the most hotel projects (69) in the development pipeline, followed by New York (57), Dallas (57), Los Angeles (50) and Atlanta (49).

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