When Will There be too Much New Construction?
April 19th, 2007 - Category: Hotel, Real EstateIt’s hard to say just when. Development is driven by the availability of capital, which is plentiful. Each economy is booming in its own right. Occupancy, ADR’s and RevPars are at or near historic levels and there’s significant guest room shortages in many markets.
In a time of unprecedented economic growth, trying to predict future demand growth is nearly impossible. Finding the correct balance with supply growth is an equally impossible task. Because the pace of development is so fast it’s likely that some poor decisions will be made.
The availability of capital and strong industry performance indicates that developers are going to continue to build. Franchise companies see this as a once in a lifetime opportunity and are highly motivated to expand the distribution of their brands. These are terrific times. For now, there’s no end in sight.
Assuming there is no unforeseen exogenous event that short circuits the present development cycle we can only know about demand/supply balances by looking backwards into the rear view mirror: in Beijing, probably by ’09; in Macau in 2010; Shanghai in 2011 and across India, probably in 2011 as well.
Lodging Econometrics (LE) of Portsmouth, NH is the global authority for hotel real estate. LE conducts Supply Side research for all markets, developers and brands and companies in: U.S.; Canada; Mexico, Central America and the Caribbean; Europe; Asia; Middle East; South America; and Africa.
