LE's 2006 Supply Side Forecast For Canada Calls For 60 Newly Constructed Hotels With 5,854 Rooms To Open
Lodging Econometrics (LE), the Industry Authority for Hotel Real Estate, released its annual Supply Side Forecast for the Canadian Lodging Industry indicating that sixty newly constructed hotels will open in 2006 having 5,854 rooms.
Lodging Econometrics (LE), the Industry Authority for Hotel Real Estate, released its annual Supply Side Forecast for the Canadian Lodging Industry indicating that sixty newly constructed hotels will open in 2006 having 5,854 rooms.
According to Patrick Ford, President of LE, “This amounts to a gross growth rate for guest rooms of 1.7% in 2006, but is prior to any hotel closings or reductions in guestroom inventory for conversion to private residences.” Ford also indicated that 82 hotels with 7,722 rooms are scheduled to open in ’07.
Both forecasts call for incremental increases compared to year-end ’05 where 55 new hotels with 4,951 rooms are expected to be added. These forecasted supply increases are reflective of a rebounding economy and an improving lodging industry off the ’03 bottom that is encouraging developer investment.
New Project Announcements Are Accelerating
Now that the lodging recovery is assured and continues in an upward trend, and because the lending environment remains attractive, New Project Announcements into the Construction Pipeline have accelerated during the first three quarters of ’05.
118 new projects entered the Pipeline through the end of the third quarter (Q3). They have 15,376 rooms and average 130 rooms in size. “That represents solid investor confidence and is proportional for this stage of the recovery following three straight years of net supply growth of less than 1% per year.” said Ford.
Ford cautions that although New Project Announcements may be accelerating, they don’t always all come to fruition. Cancellations can range from 25% – 50% over time. Ford further notes that successful small projects can take up to 20 months from the date of announcement to their opening date and up to 30 months for larger projects which means that the announcements made this fall won’t enter the industry’s operating inventory until ’07 or perhaps ’08.
At 3Q the total Construction Pipeline stood at 211 hotels with 26,334 rooms. 61 projects are currently Under Construction. 103 are Scheduled to Start Construction in the next 12 months, while 47 projects are in various stages of Early Planning.
Pipeline Concentrated in Four Provinces
Nearly 85% of planned New Construction is concentrated in four provinces. Ontario leads with 83 of the 211 projects followed by British Columbia with 40, Alberta with 30 and Quebec with 25.
Two out of three projects are located in the metro areas of the country’s top 10 markets. Both Toronto and Niagara Falls have 26 projects in the Pipeline. Other leading cities are Vancouver with 22, Montreal with 14 and Halifax and Edmonton with nine each.
Brand Selection Critical to Developer Success
159 out of 211 projects in the Construction Pipeline have already chosen a nationally recognized brand. Currently, there are 83 hotels in the Independent segment. History has shown that about 65% of these will choose a brand prior to opening. In total, about 85% of all Construction Pipeline projects will open as branded hotels.
At the present time 77 hotels have selected Cendant Brands. By far, the leading brand is Super 8 with 67 projects – 37% of all Pipeline Projects – having 5,073 rooms. Another Cendant brand is Days Inn with seven projects. Marriott International is second with 22 projects: seven full-service Marriotts, seven Courtyards and six Residence Inns. Hilton follows closely with 20 projects: seven Homewood Suites, seven Hampton Inn & Suites and four Hilton Garden Inns. Intercontinental has 15 projects, eight of which are Holiday Inn Express while Best Western has 12 projects in the Pipeline.
Lodging’s Future is Bright
Ford states that LE’s forecasting visibility is quite clear through ’07. After three years of declines from ’01-’03, guest room demand has recovered nicely in ’04 and ’05. LE sees further increases ahead in ’06 and ’07. The industry is now entering the expansion phase of the lodging cycle where continuing demand growth should provide an increasing ability to improve room rates, which is the key for the industry to return to the peak profitability levels registered in 2000. Hopefully that should be attained by 2008.
- The Census of Open and Operating Hotels
- Condo Hotel Development
- New Construction
- Timeshare Development
- Reflaggings
- Hotel Transactions
- Significant Renovation Programs