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Hotel Development Slows Across the Country

The number of hotel projects under development across the country declined by a whopping 27.9% in August over the same period in 2008, a new report shows. The number of rooms in the August 2009 pipeline decreased 2.5% from the previous month.

“The U.S. development pipeline continues the steady slowing we’ve seen since 2007,” said Duane Vinson, vice president at Smith Travel Research, based in Hendersonville, Tenn., in a statement. “All regions of the U.S. are experiencing dramatic decreases in pipeline activity.”

The total active hotel development pipeline includes 4,384 projects with 475,521 rooms, according to the August 2009 Smith Travel-Torto Wheaton Research-Dodge Construction pipeline report released this week. The active pipeline data includes projects in the construction, final planning and planning stages, but does not include projects in the pre-planning stage.

Slowing supply growth is expected to positively affect industry fundamentals in early 2010, according to Smith Travel. “Hopefully with improved economic growth, demand will firm, resulting in stronger occupancies and better average rate movement across the industry,” said Vinson.

The steepest drop in the number of rooms under construction occurred in the East South Central region, where the year-over-year decline was 56.6%, to 6,466 rooms. In New England, the number of rooms under construction fell 46.5% to 2,666 rooms. Declines in the number of rooms under construction were reported across all regions.

When it comes to total rooms in the active pipeline, significant year-over-year declines were also reported in the nine U.S. regions. The East North Central region posted the largest drop, 36.8% to 37,172 rooms. The Mountain region fell from 85,259 rooms in the total active pipeline in August 2008 to 55,106 rooms in August 2009, a 35.4% decrease.

Two other regions registered decreases of more than 30% in rooms in the total active pipeline: the East South Central region, where the decline was 33.8% to 30,263 rooms, and the South Atlantic region, with a 31.2% decline to 115,497 rooms.

The New England region reported the smallest decrease, falling 16.9% to 17,976 rooms.

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