Hotel Project Abandonment Soars

Dec. 18, 2008
The number of hotel guestrooms in the construction pipeline in the United States that have been abandoned is increasing
The number of hotel guestrooms in the construction pipeline in the United States that have been abandoned increased by 75 percent in November 2008 over November 2007, according to data from the STR/TWR/Dodge Construction Pipeline Report.

The Total Active Pipeline for the United States through November includes 631,680 guestrooms - including 191,807 that are in the "In-Construction" phase. The Total Active Pipeline figure is 6.7-percent higher than it was in November 2007, while the number of rooms in the In-Construction phase is 6.8-percent lower than it was in November 2007.

November 2008 figures released last week show that 93,219 guestrooms have been abandoned in various stages of development - from Pre-Planning to In Construction. That figure is 8,729 more guestrooms than in October 2008, and 39,887 more guestrooms than were abandoned as of November 2007.

"Given the current state of the economy and the non-existence of new-construction lending, these numbers aren't surprising," says Jan Freitag, STR's vice president of global development. "We believe that we will continue to see this high level of abandonment through at least the first half of 2009. Until new funding for new and existing projects is made available by lenders, there is little reason to believe that the rate of abandonment will slow."

The November report shows that the total U.S. supply of 4,677,165 guestrooms through November is 3.2-percent higher than it was at the end of November 2007. Five of the nine U.S. regions reported year-over-year decreases in the number of guestrooms in the In-Construction stage: New England (-47.2 percent), West North Central (-27.3 percent), Pacific (-26.5 percent), Mountain (-23.7 percent), and East North Central (-12.7 percent). The West South Central region, which consists of Arkansas, Louisiana, Oklahoma, and Texas, reported a 17.7-percent year-over-year increase of rooms In Construction. Other regions include: Middle Atlantic (+12.2 percent), South Atlantic (+3.1 percent), and East South Central (0.0 percent).

'The number of rooms In-Construction continues to decline significantly in many regions, with very notable exceptions in the Middle Atlantic and West South Central," says Duane Vinson, STR's vice president, content management. "With increased difficulty in securing financing and many brands cautious about their '09 debt ratio projections, you should expect more of the same in the coming quarters."

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