Forecast for 2009 Predicts that 1,354 Hotels Will Open in U.S.

Private Equity Makes a Big Splash in the Lodging Industry

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. October 14, 2008

JULY 19, 2007. Lodging Econometrics (LE), the Global Authority for Hotel Real Estate, in its mid-year report to the Lodging Industry has just released the highly anticipated Forecast for New Hotel Openings in 2009. LE predicts that 1,354 new hotels having 159,368 rooms will open in '09: a gross growth rate of 3.3% for that year, likely to net to slightly less than 3% after accounting for hotel closings and other removals from the industry's Census.

After reviewing over 4,600 projects in the total current Pipeline directly with developers and re-verifying Construction Start and Completion Dates with Brand managers, LE made just minor adjustments to its earlier Forecast for '07. Totals are now expected at 1,042 hotels / 100,924 rooms, representing a 2.2% growth rate for '07; and 1,200 hotels / 136,692 rooms with a 2.9% growth rate for '08.

LE's president, Patrick Ford, said, 'The Pipeline has grown at an accelerated pace since 2005 and is just now beginning to unfold for the next phase of the cycle. New Openings in '07 and '08 should be comfortably absorbed now that the economy has again sparked forward, but '09 will begin to show wider supply/demand imbalances that will continue into the early years of the next decade.' Ford continued, 'Record breaking industry-wide profitability is expected into '09 - but it will be mostly driven by room rates. Barring any exogenous economic or political event, this cycle peak should be a real sweet spot for the industry.'

All Pipeline Metrics are at a Cyclical High

'Now that a near-term recession is no longer likely, developers have turned exuberant once again and are moving at a quick pace. For the last two quarters the Pipeline has grown at an accelerated pace and stands at a cyclical high of 4,636 projects / 611,341 rooms. The Pipeline grew by 643 projects / 81,403 rooms in the first half of '07 alone, a 15% increase,' said Ford.

Project migration up the Pipeline has accelerated now that economic visibility is clearer. Projects Under Construction and those Scheduled to Start in the Next 12 Months are also at cyclical highs.