45 percent Increase in New U.S. Hotel Construction in 2006
JUNE 27, 2006. PricewaterhouseCoopers forecasts that construction will begin on 119,000 new hotel rooms in 2006, an increase of 45 percent over 2005. The largest percentage increase will be in upscale hotels and mid-price hotels without food and beverage. This compares with the 10 and 25 year average new hotel room construction starts of 108,652 and 82,625, respectively. This is the highest level of new hotel room construction since 2000.
According to F.W. Dodge, last year's new hotel room construction was 82,625, only 3.2 percent over the 80,038 room starts in 2004, representing a 4.4 percent increase over 2003. The slowing growth in construction starts in 2004 and 2005 reflected a number of factors, including a higher ratio of full service hotels being built (full service hotels require longer planning before construction begins), increased costs for construction materials and cancellation or delays for projects in the Southeast and Gulf regions because of hurricane damage.
The increase in 2006 is supported by the largest three-year U.S. lodging industry revenue per available room (RevPAR) increase since 1981.
"The increase in construction activity in 2006 reflects the positive outlook in the industry for occupancy to increase by a full occupancy point to 64.3 percent and the average room rate to increase by 6.4 percent for an impressive RevPAR increase of 8.4 percent," said Bjorn Hanson, Ph.D. and principal, PricewaterhouseCoopers Hospitality and Leisure practice. "Even with this large increase, supply will continue to increase at less than demand for 2006 and 2007."
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