A handful of new brands launched just before the downturn assured rapid growth by way of new construction and promised to breathe new life into a tiring hotel landscape. I, for one, was excited to liven up business trips with overnight stays at Edition, NYLO, Element and 1 Hotels, to name a few.
So now that we’ve emerged from an economic recession, when hotel demand is nearing peak performance levels and “smart” developers are breaking ground on properties that will open at the height of the cycle, will we finally be able to try out some new brands?
For the most part, no. Save Home2 Suites by Hilton, the brands that will emerge from the construction pipeline and add the most supply in the coming years are the same brands we’ve been accustomed to during the past decade.
According to the STR/McGraw Hill Dodge Construction pipeline, expect a brand new Holiday Inn Express, Hampton Inn & Suites or Courtyard by Marriott to appear in your city between now and 2014. In fact, of the Top 15 brands in all U.S. active pipeline phases by room count, only one brand is less than 10 years old—Home2 Suites.
There are a couple of reasons we’re seeing the same big brands add more new hotels. First and foremost is financing. Money makes the world go round, right? When hotel developers today walk into a bank and ask for a new construction loan—after sharing a few laughs—the banks require strong sponsorship and most always a flag with a superior track record.
“Construction starts—generally speaking they are branded properties. There’s not much room for properties that don’t have a brand,” said Pat Ford of Lodging Econometrics. “Typically they’re upscale properties and franchises of Marriott, Hilton, Starwood and Hyatt.”
In fact, Ford said of the 387 hotels his firm tracks as “under construction,” nine are considered a casino, 325 are branded and 53 are considered independent.
Second reason: Brands like Hilton Hotels & Resorts and Marriott Hotels & Resorts are no longer spring chickens. As some of the properties age, the franchisors aim to freshen up the portfolio, said Bobby Bowers of STR. “As the product becomes obsolete, and when you look at the type of product being developed over the past few years, you’ve got to replace a few of those,” he said.
Some other notes about the type of new hotels expected to first exit the pipeline in 2013:
• Of the 387 hotels under construction, only 40 of them are larger than 200 rooms, according to Ford.
• The upper-midscale and upscale segments account for the largest portions of the total rooms under construction in the U.S. As of July, there were 16,633 upper-midscale rooms under construction (30.3% of the total U.S.), and 14,836 upscale rooms under construction (27.1%).
• Home2 Suites, launched in January 2009, already has three newly-built properties open (including an adaptive reuse) and eight hotels representing 871 rooms under construction, easily the fastest-growing new brand, according to STR.
• Centerstone Hotels, launched in May, already broke ground on its first hotel in West Chester, Pennsylvania.
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