by Cheryl-Anne Sturken | April 01, 2005

Aerial view of Miami
Less building =
pricier rooms in Miami.

Few full-service city hotels are in development over the next two years, according to a recent industry report. As a result, say the experts, planners will face high occupancy levels and increased room rates in some cities as demand outstrips supply. 
    The February 2005 report, issued by Portsmouth, N.H.-based Lodging Econometrics, found only 122 new hotels opened in 2004, down from 147 in 2003. Much of the new inventory was comprised of mid-market brands like Fairfield Suites and Holiday Inn.
    “There’s an absence, compared to prior years, of large convention properties [being built] in central business districts,” said Patrick Ford, president of Lodging Econometrics. “Instead, you see a lot of renovating and reflagging.”
    Atlanta-based PKF Consulting found the lack of hotel projects a sign that some major cities, like Atlanta, Houston and Los Angeles, still are struggling to recover from the post-9/11 downturn in travel.
    “It is easier to find financing for a Marriott Courtyard than for a full-service Hyatt downtown,” said Robert Mandelbaum, director of research information services for PKF. “Market conditions have to grow in order to justify building upscale hotels.”
    In cities such as Anaheim (Calif.), Miami and San Diego, where demand is high but new hotels are scarce, planners will have a hard time finding availability.
    In New York City, according to a February study conducted by Washington, D.C.-based PricewaterhouseCoopers, average room rates will rise to $223.65 in 2005 and $244.79 in 2006, a growth rate faster than in
any of the other top-25 U.S. hotel markets.
    Long term, the crunch will ease. “A new construction boom is ahead,” said Ford. “Big  hotels take three to five years to complete, so  you are looking at 2009 before you see any real new inventory.”