In Q1 2009, the US Construction Pipeline decelerated rapidly and now stands at 4,918 projects/619,431 rooms.

Compared to the Pipeline peak in Q2 2008, this is a drop of 16% by projects and 21% by rooms, a substantial fall-off for a three-quarter period. Current pipeline trends are beginning to reflect the deep recession in the economy, the banking crisis, the evaporation of mortgage lending, and serious shortfalls in lodging operating performance.

While selected smaller projects are still able to locate financing under stringent terms, larger-scale construction cannot. As a result, numerous projects are stalled in the pipeline as developers struggle with credit difficulties and the changing operating environment.

Accelerating project cancellations are now reaching the highest level LE has ever recorded. New Project Announcements into the Pipeline are trending further downward. Those projects seeded in the pipeline at mid-decade and already financed are now opening at an increased speed. New supply additions will reach a cyclical peak in 2009 and then taper off beginning in 2010.

At Q1, there were 1,446 projects/192,448 rooms Under Construction, a drop of 22% and 21% respectively from the Q2 2008 peak.

The impact of the financing crisis is evident in the slowed forward migration of projects. Presently, just 29% of total pipeline projects are presently Under Construction, with totals expected to continue to trend downward until 2011. The swift drops have prompted LE to revise its Forecast for New Hotel Openings lower for 2009 by 4,238 rooms or 2.6% and by a much larger 15,169 rooms or 9.4% in 2010.

Projects Scheduled to Start Construction in the Next 12 Months have declined precipitously from the Q2 2008 peak, down 23% by projects and 29% by rooms. The slump is a result of the rise in Cancellations and Postponements, which is expected to continue.

At 2,108 projects/232,949 rooms or 43% and 39% of the Total Pipeline, respectively, Scheduled Starts show a large backup of projects that lack the financing to start construction. 12-month starts will also be a source of additional Cancellations and Postponements, as the economy and the lodging operating environment add to growing developer concerns.

Projects and rooms in Early Planning are declining, but more modestly. This stage is generally where New Project Announcements enter the pipeline, and also serves as a repository for larger projects that are confirmed as being actively pursued by developers, but currently have little chance of locating financing.

Marginal projects will continue to drop out, as the declining economy affects feasibility and a developer's willingness to continue to invest in idle projects. LE expects overall pipeline totals to continue to decline at least into 2011.

Please contact me if you'd like to inquire about a Pipeline Report for any market or country worldwide or if you would like to interview an LE executive.

Best regards,
Jennifer Robertson
Marketing Communications Manager
Lodging Econometrics
500 Market Street, Suite 12
Portsmouth, NH  03801, USA
Ph:    +1 603-431-8740 ext. 19
Fax:   +1 603-431-4418
jrobertson@lodgingeconometrics.com