|A steadily improving job market and a stock market on the rise has lenders releasing more funding to developers than what’s been seen in previous quarters, resulting in relative stability of the U.S. Construction Pipeline, which totaled 2,720 projects/331,129 rooms at the end of Q1 2012.
Developers focused on Pipeline stability over Pipeline growth has caused a slightly negative year-over-year (YoY) variance of 8% by project and 6% by room from Q1 2011’s 2,951 projects/354,100 rooms.
A strong indication that there is a steadier migration of projects through the Pipeline is in the upswing of projects under construction. The under construction project stage increased 19% by projects and 17% by rooms from 426 projects/54,530 rooms in Q1 2011 to 506 projects/63,952 rooms in Q1 2012. This stage of the Pipeline has seen a steady increase over the last seven consecutive quarters. Cancellations and postponements in Q1 ’12 dropped 38% from the previous quarter to 195 projects/22,800 rooms, although projects breaking ground have seen notable stability as construction starts continue to trend upward, despite a slight dip in Q1.
The focus is on higher profile projects as luxury, upper upscale, upscale and upper midscale chain scales saw an increase in total projects and rooms in the Pipeline. Upscale and upper midscale alone combined to make up 54% of the total construction Pipeline, while midscale and chain scales below decreased slightly in the first quarter.
As the U.S. Construction Pipeline slowly stabilizes itself, LE’s revised forecast points to a slight dip in new hotel openings in 2012 to 325 hotels/ 36,830 rooms from 2011’s 345 hotels/37,122, as developers continue to move the flow of projects towards opening. Consequently, 2013 is expected to see only a marginal increase in new hotel openings to 358 hotels/36,877 rooms, while the current boost in projects that are under construction reaches fruition.