STR’s SVP of Operations Bobby Bowers gave a rundown of the current hotel supply pipeline during a data dash session at the 2017 Hotel Data Conference.
NASHVILLE, Tennessee—There’s a lot going on in the global hotel pipeline.
At the recent 2017 Hotel Data Conference, Bobby Bowers, SVP of operations at STR, Hotel News Now’s parent company, broke down the pipeline and how it relates to existing supply and future projections in a session titled, “Hotel supply pipeline: How much is enough?”
Here are three key takeaways from the presentation:
1. There are more than 700,000 rooms under construction
STR’s under contract data is comprised of three categories: rooms in construction, rooms in the final planning stage and rooms in the planning stage.
“There are a little over 700,000 rooms under construction right now, most of which are in (Asia/Pacific) and the United States,” Bowers said. “You talk about the top 10 countries …. (it’s) not surprising that the U.S. and China lead there.”
He added that there are about 187,000 rooms under construction right now in the U.S.
2. As lending standards tighten, the pace of new construction slows
There’s less money available for construction and land development loans, Bowers said, and room count has decreased over the last few months.
“The Federal Reserve conducts a quarterly survey of their lending institutions, and this (chart) is showing that a lot of folks out there at the banks say that the standards for construction and land development loans have been tightened a bit,” he said, “and if you talk with some of the developers I’ve talked with over the last few days, … it’s getting a little bit harder to get money to construct.”
Bowers said room count in the last three or four months has gone down in the pipeline.
“I (will) tell you that we just got the numbers for July, and it’s actually back up a bit, so it’s now, instead of three of the past four, it’s three of the past five are down, but nonetheless, the red line there looks at the percentage change from the prior year, that ends at about 12%, in July, it’s down to about 10%,” he said. “The bottom line is … the pace of new construction, apparently, is starting to slow a bit and perhaps has crested.”
3. Midscale product dominates final planning
A slide from Bowers’ presentation shows there’s a lot of rooms under construction in the upper upscale segment, and there’s a lot of new product in final planning in the midscale segment.
“When you look at midscale construction and economy construction, from a percentage growth perspective, that’s some pretty significant gain,” he said. “If you look at midscale …. Especially in the final planning, there’s a lot of new product, brands that’s in the midscale group.”
He said the two brands that make up 80% of what’s in the final planning stage are Tru by Hilton and La Quinta.