hospitalitystyle.com

(February 2011) posted on Wed Feb 02, 2011 EST

In the U.S., it’s the 3rs: Renovation, repurposing, rebranding

By Mary Scoviak editor

If you want to build your hospitality design fee volume this year, sell your skills as a turnaround expert. New supply in the U.S. has been shut down to a trickle since the recession, and 2011 won't have much better news. Lodging Econometrics (LE) reports that developers have pushed back a large number of the projects already in the pipeline from “Scheduled Starts in the Next 12 Months” to “Early Planning.” This resulted in a historic low of 449 projects with 53,991 rooms for the “Under Construction” stage, which now accounts for just 14 percent of all projects in the total pipeline.

LE predicts that new hotel openings will remain in a bottoming trend over the next three years, as the pipeline continues to recede. For 2011, LE projects that just 446 hotels with 46,343 rooms will come online, a gross growth rate of 0.9 percent. Put into perspective, that's a fall-off of over two-thirds from the cyclical highs in 2008 and 2009. 2012 isn't likely to be memorable either, as LE forecasts 487 hotels with 48,860 rooms will open. Blame scarce financing.

Okay, that's not great. But there is good news for hotels that have stayed the course. Lower supply is driving performance as demand cycles up. “Until more substantial profitability gains are posted, it will be cheaper to buy existing properties than to construct new ones, a trend likely to extend at least into 2012,” says JP Ford, LE's president and founder. Another trend is that, as guests pay more for rooms, they're going to demand more from design. And that means more renovation work as properties change ownership or get some cap ex from current owners.

Some companies who might consider targeting:

·      Chatham Lodging Trust, which announced a new public offering to repay debt and acquire hotels

·      InterContinental Hotels Group, which recently announced it will invest $500 million in some 47 projects in Mexico

·      Richfield Hospitality, which added three hotels to its portfolio in January fast on the heels of six hotels acquired during 2010

·      Choice Hotels International, which just created a new position for a vice president of European development

·      Trump International, which is making international moves as well

 Some cities that might be worth a focus, according to panelists speaking about U.S. Hot Spots at the recent ALIS conference in Los Angeles:

·      Baltimore

·      Los Angeles

·      Philadelphia

·      Newark

·      New York

·      Jacksonsville, Florida

·      Houston

·      Oakland, California

·      Portland

·      Seattle