ITB 2019 Special Reporting
Hotel construction pipeline hit cyclical high, however growth trends may be starting to slow
Tuesday, 27th November 2018
Source : Lodging Econometrics (LE)

Canada’s construction pipeline projects are at a cyclical high, Europe’s pipeline continues to boom while the Middle East’s pipeline hits a new cyclical high.

Analysts at Lodging Econometrics (LE) report that in the third quarter of 2018 the total construction pipeline in Canada stands at 247 projects/29,954 rooms. Construction pipeline projects are at a cyclical high with an increase of 19 projects year-over-year (YOY).

Indications are that the pipeline is in a topping-out period. Total guest rooms in the pipeline appear to have peaked in the 3rd and 4th quarters of 2017, signaling the onset of further pipeline declines ahead. Other pipeline metrics that signal a possible decline are rooms under construction, rooms scheduled to start construction in the next 12 months, and new project announcements into the pipeline which have all been decreasing since fall of 2017.

Projects presently under construction are at 89 projects/10,781 rooms, of which 40 projects/4,283 rooms began construction in the first three quarters of 2018. Projects scheduled to start construction in the next 12 months are at 85 projects/9,893 rooms, a minimal 2% decline in project counts.

Projects in the early planning stage show a 20% increase with 73 projects/9,280 rooms recorded. With the Bank of Canada expected to increase interest rates again in January, developers continue to hurry projects from their drawing board into the permitting and early planning phase.

In the first three quarters of 2018, Canada had 36 new hotel openings. LE’s forecast for new hotel openings predicts another 10 hotels will open in the last quarter of 2018, bringing the total to 46 new hotel openings. 2019 is forecast to see 54 projects/6,220 rooms open, and 2020 anticipates that 63 projects/6,873 rooms will open and come online as new supply, which should be the high for this cycle.

Marriott International leads the top hotel companies in Canada’s construction pipeline with 51 projects/7,176 rooms, followed by the InterContinental Hotel Group (IHG) with 45 projects/4,359 rooms, and Hilton Worldwide with 42 projects/5,157 rooms. These three companies make up 56% of the total construction pipeline.

The top brands in the pipeline are IHG’s Holiday Inn Express with 28 projects/2,839 rooms, Hilton’s Hampton Inn & Suites by Hilton with 18 projects/2,161 rooms, Marriott’s Courtyard with 10 projects/1,509 rooms and TownePlace Suites with 10 projects/995 rooms, and Hyatt Hotel’s Hyatt Place with 9 projects/ 1,266 rooms.

Markets with the most projects in the pipeline are Toronto with 40 projects/5,250 rooms, Calgary with 15 projects/2,225 rooms, Edmonton with 13 projects/1,948 rooms, Ottawa with 11 projects/ 1,909 rooms, and Vancouver with 11 projects/ 1,290 rooms.

The Middle East’s Hotel Construction Pipeline Hits A New Cyclical High

Analysts at Lodging Econometrics (LE) report that in the third quarter of 2018 the hotel construction pipeline in the Middle East has set another cyclical high with the total pipeline standing at 617 projects/180,097 rooms. The new pipeline project counts are up 8% while room counts show a 15% increase year-over-year (YOY) when the pipeline stood at 572 projects/156,420 rooms. 

Projects presently under construction are at 360 projects/115,222 rooms and are at a record high. Projects scheduled to start construction in the next 12 months are at 138 projects/35,299 rooms, and projects in the early planning stage are at 119 projects/29,576 rooms.

The pipeline has grown for five consecutive years off of the 2013 lows and has surpassed the development surge of 2007-08 led by Dubai and Abu Dhabi which awakened hotel development in the region. However, growth trends may be starting to slow as construction starts and new projects announced into the pipeline have been declining throughout 2018.

Countries with the greatest number of projects in the construction pipeline are the United Arab Emirates with 223 projects/63,734 rooms and Saudi Arabia, at a record high, with 214 projects/76,324 rooms. Qatar follows with 59 projects/14,245 rooms and Egypt with 43 projects/10,237 rooms. Continuing to dominate the construction pipeline in the U.A.E. and throughout the region is Dubai with 169 projects/50,420 rooms. Other notable but distantly following emirate countries are Abu Dhabi with 20 projects/5,058 rooms and Ash-Shariqah with 18 projects/2,671 rooms.

Cities with the largest hotel construction pipelines are Riyadh with 61 projects/11,574 rooms, the Provincial region with 58 projects/11,534 rooms, Jeddah with 58 projects/11,520 rooms, Doha, Qatar with 55 projects/12,618 rooms and Makkah with 37 projects/41,696 rooms. Four of the cities with the largest pipelines are in Saudi Arabia and are enjoying record highs in their pipeline project and room counts.

AccorHotels is the top company in the Middle East having the largest construction pipeline with 102 projects/28,079 rooms, a record high for the company. Marriott International follows with 95 projects/21,083 rooms, and Hilton Worldwide, also reached record highs in 2018, with 90 projects/25,888 rooms.

The leading pipeline brands for these companies are AccorHotels’ Ibis brands with 18 projects/5,861 rooms, and Novotel, with 16 projects/5,204 rooms, a record high; Marriott’s Courtyard with 21 projects/4,476 rooms, and Residence Inn with 16 projects/1,877 rooms, both of which are also recording their highest pipeline counts; Hilton’s full-service Hilton Hotel & Resort with 26 projects/9,280 rooms, and DoubleTree by Hilton with 25 projects/5,873 rooms.

The Middle East at 291 rooms per construction project, has the largest average project size in the pipeline of any region in the world as 67% of its pipeline is concentrated in the three highest chain scales: luxury, upper upscale, and upscale.

LE expects that new hotel openings in 2018 will be 86 hotels/23,464 rooms, surpassing for the first time the peak of 72 hotels/19,756 rooms set in 2009 following the 2007-08 development surge. New records will be set in both 2019 and 2020 as LE’s forecast for new hotel openings predicts that 114 hotels/27,518 rooms and 134 hotels/36,277 rooms will open in each year.

Europe’s Hotel Construction Pipeline Continues to Boom

In the recent report by Lodging Econometrics’ (LE), Europe’s total construction pipeline, which is in a three-year surge, stands at 1,449 projects/228,588 rooms. There are 749 projects/120,689 rooms currently under construction, 395 projects/61,707 rooms planning to start construction in the next 12 months, and 305 projects/46,192 rooms in the early planning stage. The total pipeline increased a robust 18% by projects and 21% by rooms year-over-year (YOY). In addition, each of the three project stages are at or near the highest project and room counts since LE began recording in the region in 2008. 

Accordingly, the LE forecast for new hotel openings anticipates a concomitant increase in new hotels coming on line as new supply over the next several years. 289 new hotels/38,124 rooms have opened year-to-date, and 88 projects/11,954 rooms are expected to open in the fourth quarter, for a total of 377 new hotel openings/50,078 rooms for 2018, the highest number of new hotel openings ever recorded by LE. In the years following, 2019 is forecast to have 390 new hotels open/58,364 rooms, and 390 hotels/58,599 rooms to come online in 2020.

Europe’s top hotel companies in the construction pipeline are AccorHotels, at an all-time high, with 225 projects/29,613 rooms, Marriott International with 186 projects/31,192 rooms, Hilton Worldwide with 170 projects/26,988 rooms, and InterContinental Hotels Group (IHG) with 139 projects/23,540 rooms. These four companies make-up 50% of the total hotel construction pipeline in Europe. That percentage is expected to rise as some 21% of the projects in the pipeline have yet to choose a brand.

The leading brands for each of these top companies are AccorHotel’s Ibis brands with 118 projects/14,635 rooms, Mercure Hotel with 25 projects/2,346 rooms, and Adagio City Aparthotel with 22 projects/2,976 rooms; Marriott International’s Moxy with 58 projects/10,227 rooms, Courtyard by Marriott with 33 projects/5,943 rooms, and the Autograph Collection with 15 projects/2,031 rooms. In addition, Hilton Worldwide has Hampton Inn with 67 projects/ 10,447 rooms, Hilton Garden Inn with 46 projects/7,316 rooms, DoubleTree by Hilton with 22 projects/3,132 rooms; and IHG’s Holiday Inn Express with 65 projects/9,813 rooms, Holiday Inn with 36 projects/7,981 rooms, and Hotel Indigo with 14 projects/1,733 rooms. AccorHotels and Hilton’s pipelines are at new highs while Marriott and IHG are very close to their cyclical highs.

Europe’s leading countries in the construction pipeline are Germany with 265 projects/49,640 rooms, the United Kingdom with 256 projects/39,008 rooms, France with 144 projects/17,003 rooms, Portugal with 87 projects/9,012 rooms, and Poland with 86 projects/13,134 rooms. With the exception of the United Kingdom, these markets all have construction pipelines at cyclical highs.

The European cities with the largest pipelines are London with 82 projects/14,663 rooms, Paris with 45 projects/6,947 rooms, Dusseldorf with 40 projects/8,353 rooms, and Frankfurt with 30 projects/6,228 rooms. Followed by Lisbon with 30 projects/2,800 rooms, Istanbul with 29 projects/5,386 rooms, and Moscow with 29 projects/6,512 rooms.

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