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Hotel development drops to the lowest level in a decade

During fourth-quarter 2001, the number of new hotels dropped to the lowest level since the early 1990s, says Lodging Econometrics (LE), the research division of National Hotel Realty in Portsmouth, N.H.

The total development pipeline — which LE defines as all hotels currently under construction, those expected to start construction within the next 12 months and all hotels in early planning — totals 2,328 projects and 314,185 rooms. The report says that room count represents a 10.4% quarter-to-quarter decline and a 28% drop since January 2001. The decline was in all stages of development and across all chains, except for independent, non-branded hotels.

According to the report, 403 projects with 47,730 rooms were cancelled, put on hold or declared temporarily inactive by developers during fourth-quarter 2001. Nearly 350 projects with 34,036 rooms were started, slightly less than the 354 new projects announced in third-quarter 2001.

Projects in early planning were down 14%, the lowest level since the early 1990s. The room count also fell to 92,229 rooms, the first time it dipped below 100,000 this cycle, says the report.

In the top 25 markets, project counts are dropping, but room counts are not, says the report. New openings averaged 140 rooms in 2001, but hotels under construction and scheduled to open over the next two years have an average size of 192 rooms.

Chicago, Dallas, San Francisco, Washington, D.C., Miami, Atlanta, New York and Nashville are all experiencing declines. "A softening of the pipeline in these markets is crucial as the Top 25 play a disproportionate role on the industry’s operating statistics," says the report. "They account for 22% of the hotels, but 32% of the guest rooms and 43% of the industry’s revenue."

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