Hotel Developers Pause Projects as Materials, Labor Are in Short Supply
Development Costs Have Increased Due To Lack of Resources
Hotel development executives are focused on increasing their margins and brand collaboration throughout the rest of the year.
ATLANTA - Hotel development executives are focused on increasing their margins and brand collaboration throughout the rest of the year.
During the "Main Street Talks" panel at the 2022 Hunter Hotel Investment Conference, Hunter Hotel Advisors President and CEO Teague Hunter asked the developers for their outlook on the supply chain, construction costs and brand innovations.
Supply-Chain Challenges
Among the main causes of rising development costs, supply-chain problems are the biggest reason for the increasing price, said Mitch Patel, president and CEO of Vision Hospitality Group.
It’s become harder to obtain materials from international locations such as China and Canada, causing both the price and the timeline for arrival to increase, he said. Compared to pre-pandemic levels, development costs have increased between 15% and 23%.
Data from CoStar's hospitality analytics firm STR shows the number of hotel rooms under construction has remained mostly stable in the early part of 2022, down just 0.6% in the first quarter compared to the fourth quarter of 2021. But there are some early indications of a development slowdown, with the rooms in the final planning phase of the pipeline down 5% in that same time frame.