Hotel construction down, but New York has large pipeline

TRD New York /
Oct.October 23, 2008 06:12 PM

Hotel construction projects were down nationwide in the third quarter for the first time in five years, according to a quarterly report from Lodging Econometrics released today.

There were 5,652 projects nationwide in the pipeline at the end of the quarter, a 4 percent decline from third-quarter 2007. But, New York is faring relatively well in terms of development, the report said, with a pipeline count of at least 20 percent more rooms than the city’s current room count. The report did not provide specific data, but according to the New York Times, there are currently 77,000 hotel rooms in New York City.

Nationwide, projections were grim. There were substantial decreases in the number of projects slated to begin construction in the next year, and a number of projects regressed from the “scheduled starts” stage to the “early planning stage,” which the report says is an indication that developers are rethinking projects amid the credit crisis. The decline in construction is expected to continue into 2010.

Hotel chains are already expecting less revenue for late 2008 and 2009.

Starwood Hotels & Resorts Worldwide has already begun to cut employees and close sales centers in response to lower profit projections. Hotels’ corporate rate increases in 2009 will likely be much lower than they have been in recent years, according to Bjorn Hanson, an associate professor at NYU’s Preston Robert Tisch Center for Hospitality, Tourism, and Sports Management.

But one positive for hotels nationwide in this economy is that declining hotel construction could help hotels boost occupancy rates, experts said. TRD

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