LE's Latest Europe, Middle East and Africa Pipeline Summary

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. March 11, 2009

MARCH 11, 2009 - Europe has the largest Pipeline in EMEA with 971 projects/161,236 rooms at the end of Q4 2008. The Middle East's Total Pipeline has 503 projects/147,488 rooms.

Africa's totals 171 projects/35,267 rooms. As in other parts of the world, the Pipelines in these renotgions are heavily weighted for the near-term. 50% of Europe's projects and 53% of projects in both the Middle East and Africa are already Under Construcnottion. This is due to the rush by developers during Q4 2007 and Q1 2008 and through the fall in the Middle East to get projects in the ground before the availabilnotity of lending was further reduced.

The United Kingdom accounts for 24% of European Pipeline rooms with 279 projects/39,096 rooms. Spain follows with 152 projects/20,779 rooms. Dubai, havnoting 136 projects/50,414 rooms, leads in the Middle East with 34% of Total Pipeline rooms, Abu Dhabi being next at 73 projects/23,489 rooms. Practically all are large, high-end, world-class resort destination properties. With 25% of the room count, Morocco has the largest share of Africa's Pipeline with 45 projects/8,787 rooms. South Africa follows with 29 projects/4,798 rooms.

The economies in these regions are quickly softening. Lending is rapidly drying up, except for smaller mid-market and economy projects. The withdrawal of cross-border global banks is having major impact, particularly in Eastern Europe and the Middle East. As a result, Pipeline project and room counts are declining and are expected to continue to do so at an even more rapid pace in the months ahead.

Currently, Europe's Pipeline project counts are off 5% and rooms 6% from Q2 2008's cyclical peak. Africa is down 4% for both projects and rooms. In the Middle East, project and room totals are down 10% from Q2.

KEY METRICS

At a combined 136 projects/23,118 rooms, Construction Starts in all three regions are trending down and are expected to continue so throughout 2009-10. Project migration up the Pipeline towards Under Construction has slowed due to the lack of available financing. That has caused a build-up of projects in the Scheduled Starts in the Next 12 Months and Early Planning stages. Many of these 'stalled' projects will have difficulty migrating forward unil the financing crisis is resolved.

Now at 164 projects/37,470 rooms, Project Cancellations and Postponements have accelerated in the last two quarters and show a doubling since Q208. In Europe alone, project cancellations have quadrupled year-over-year. In the Middle East, the evaporation of available lending has seriously impacted their Pipeline of high-end resorts. Dubai is the most affected. 20 projects/7,477 rooms, or 21% of EMEA's total, have canceled or postponed this quarter.

New Project Announcements (NPAs) into the Pipeline are at 228 projects/34,142 rooms, trending down from the cyclical peak established in Q1 2008. Downward trends are likely to accelerate as developer concerns are further heightened by the softening economy, rapid changes in lodging operating statistics and difficulty in finding financing at acceptable terms. Notably, the average project size for New Project Announcements is declining, particularly in Europe. Developer and lender interest has shifted markedly towards mostly midmarket and, in Europe, economy projects smaller than 200 rooms.

Forecast For New Hotel Openings

In 2008, 369 new hotels with 57,910 rooms opened. New Openings in 2009 and 2010 will reach cyclical highs. 2009 will bring 452 hotels/81,122 rooms online, while 2010 will see 457 hotels/ 94,224 rooms enter as New Supply. Many of the projects are large, full-service hotels that were seeded in the Pipeline earlier in the decade. Practically all are now Under Construction.

Lodging Econometrics (LE) of Portsmouth, NH is the global authority for hotel real estate. LE conducts Supply Side research for all markets, developers and brands and companies in: U.S., Canada, Mexico, Central America and the Caribbean, Europe, Asia, Middle East, South America, and Africa.