Coming in 2007:
The 225-room
W Scottsdale (Ariz.)
Hotel and Residences
Hotel chains are flush with
dollars, thanks to hefty profits in the last several
years, and they are investing heavily in their brands. Performance
figures have yet to be tallied for the U.S. lodging industry for
2006, but there is no question that it will be another year of
solid returns like 2005, when hotels racked up $22.6 billion in
profits. That spells good news for travelers, because much of that
money is being invested in expanding portfolios, particularly
internationally, in an effort to introduce new brands and attract
new customers.
On the other hand, between 2003 and
year-end 2005, new U.S. hotel room inventory grew by a paltry 1.9
percent, according to Atlanta-based PKF Consulting. Worse, little
of that new supply was in the full-service meeting hotel category.
That lodging shortage meant big headaches for meeting planners, who
already were battling rising occupancy levels in every major
meetings destination.
That scenario does promises to change,
but slowly. By the end of this year, 26 new full-service hotels
will have opened. That number, says Portsmouth, N.H.-based real
estate specialist Lodging Econometrics, is expected to jump to 35
in 2007 and to 52 in 2008. “The meeting hotel segment -- the type
with large meeting facilities that we term ‘upper upscale’ -- is
one of the slowest in the industry with regard to growth,” says
Patrick Ford, president. “These properties are very expensive to
build because they require large parcels of land, and construction
costs are going through the roof, which is why the pipeline has not
had a lot of activity.”
The destinations with the largest
full-service pipeline, says Ford, are those experiencing new
development, such as the expansion of a convention center or urban
revival. He cites Washington, D.C., as an example. “The new
convention center spawned a lot of new full-service hotel
development,” he notes. “When a city has development like that, the
larger hotel activity moves forward with it.”
For developers and investors, though,
year-over-year rising occupancy levels and skyrocketing room rates,
coupled with huge profit margins for the lodging industry, has
turned hotel real estate into a very attractive market, making it
the most aggressive with regard to real estate investment.
According to Steve Rushmore, president of New York City-based HVS
Hospitality Consulting, U.S. full-service hotel sales will total
more than $30 billion by year’s end, up from $21 billion in
2005.
Cities with the healthiest pipelines
include Atlanta, Las Vegas, Nashville, New York City, Orlando,
Philadelphia, San Diego and the suburbs of Virginia surrounding
Washington, D.C. Leading the pack is Las Vegas, which currently has
152,000 rooms in service. Developers there are now pursuing
projects totaling 48,000 new rooms, estimated to come to market by
year-end 2010. Behind Sin City is Orlando, with 15,000 new rooms
expected to come online.
To create a snapshot of some of the new
full-service properties making their debut in 2007,
M&C researched hotel project announcements and
verified their facility specifications and opening dates. The
findings (see “Charting the U.S. Hotel Pipeline,” page 56) show
confirmed hotel projects with 10,000 or more square feet of meeting
space debuting by year-end 2007.
Global growthU.S. hotel chains are aggressively
pursuing growth opportunities in Europe as well as rapidly emerging
markets such as Asia-Pacific, India, the Middle East and Russia.
Following are highlights of developments around the world.
Asia-Pacific is hot.
There currently are 656 hotel projects in the Asian pipeline,
totaling 169,691 guest rooms, with the average property featuring
259 rooms. Of the 656 properties, 371 are now under construction,
according to a report released in October by Lodging
Econometrics.
China leads the development pipeline
with 316 confirmed projects on the books, 63 percent of the total
Asian pipeline. More than half of those are under construction.
Places with the most activity include Beijing, Macau and Shanghai.
Another six key business centers, Chengdu, Guangzhou, Ningbo,
Sanya, Shenzhen and Tianjin, have a total of 66 projects in the
pipeline.
U.S. chains investing heavily in
expansion into Asia include Beverly Hills, Calif.-based Hilton
Hotels Corp.; Atlanta-based InterContinental Hotels Group;
Washington, D.C.-based Marriott International; and White Plains,
N.Y.-based Starwood Hotels & Resorts Worldwide.
According to a September 2006 report by
PricewaterhouseCoopers’ United Kingdom division, InterContinental
and Marriott plan to add nearly 18,000 new rooms in China alone
over the next three years. By 2010, the luxury Ritz-Carlton Hotel
Co. will add nine more properties in Asia, six of which will be in
China.
At a recent lodging conference,
Hilton’s chief executive officer, Stephen Bollenbach, said the
chain hoped to have “100-plus hotels in China in the next three to
five years.” As such, he added, Hilton actively is pursuing a
partnership opportunity in the region that would allow it to
manage, rather than own, new projects.
Hilton already has two signed
management contracts in Beijing to bring the first Conrad hotel, as
well as the first Scandic by Hilton outside of Europe, to China.
Raymond Johnson, chairman of Phoenix-based Best Western
International, says 85 percent of his brand’s future investment
will be in Thailand and Taiwan, specifically in major business hubs
and resort areas.
InterContinental Hotels Group, which
opened its first property in China in 1984, opened its 58th Holiday
Inn in that country, the 780-room Holiday Inn Century City Chengdu,
in August. In a statement regarding the company’s aggressive
expansion into the region, Edmond Ip, chief operating officer,
North Asia, said, “China is a key market for InterContinental
Hotels Group and where a signification portion of our expansion
strategy will be carried out.” IHG plans to double its presence in
China in time for the 2008 Beijing Olympics.
India is poised to take
off. India has a significant hotel room shortage. At
year-end 2005, the total room count for the country was just
92,000. But a surging economy, powered by the increase in U.S.
firms outsourcing their computer support centers to the country, is
making India an attractive destination for international hotel
chains. There currently are 161 properties in the pipeline, a large
number of which are economy brands designed for the Indian business
traveler.
U.S. chains, as well, see a potential
to stake their flag. In February 2006, Starwood opened a sales
office in New Delhi as part of its plan to expand both Le M}ridien
(which it acquired in November 2005) and Westin in the region.
There are now eight Le M}ridien hotels in India, while the first
Westin is on track to open late in 2007, in New Delhi. In addition,
Starwood says it plans to bring Four Points by Sheraton and its
“aloft” brand to the country. Marriott, which has seven properties
in India, will open the 308-room JW Marriott Hotel Bangalore and
another five properties in the country by year-end 2008.
Limited service is migrating to
Europe. In September 2006, Marriott opened its first new
Courtyard by Marriott European prototype in Paris and announced
plans to open another 50 in the next five years in Europe,
primarily in the United Kingdom. Likewise, Hilton Hotels Corp.
began expansion of its limited-service brand, Hilton Garden Inn, in
Europe. In November, the 121-room Hilton Garden Inn Florence in
Italy opened for business. Scheduled to open by year’s end is the
282-room Hilton Garden Inn Rome. Currently under construction in
Germany is the Hilton Garden Inn Frankfurt, which is expected to
open in 2007, and a deal has been signed to build one in
Stuttgart.
