Construction slows for Canadian hotels

By Bizclik Editor

With 153 projects/19,181 rooms at the end of Q4 2009, the total Construction Pipeline has fallen 42% by projects and 44% by rooms from the peak in Q1 2008. The total project count is the lowest LE has recorded, while the room count is at its lowest since Q4 2004. Proportionately, the declines in Canada’s Pipeline are not yet as precipitous as in the United States, as Pipeline contractions are running 3-6 months behind the pace set in the US.

Pipeline declines will continue into the middle of the decade, likely for one to two years after a recovery in operations firmly takes hold.

LE notes that:

44% of all Pipeline projects and 46% of total rooms are currently Under Construction. At 67 projects/8,859 rooms, Under Construction totals are down 25% by projects and 28% by rooms from the Q1 2008 peak.

At 34 projects/3,813 rooms, counts for Starts in the Next 12 Months are the lowest LE has ever recorded. Projects are down 63% and rooms down 67% from the peak. These declin¬ing trends have accelerated over the last year.

52% of total Pipeline rooms are located in the five leading markets. Toronto, with 27 projects/4,624 rooms, remains the focal point for development in Ontario. Edmonton, with14 projects/1,636 rooms, and Calgary, 11 projects/1,608 rooms, make up a majority of Alberta’s 40 projects/4,611 rooms.

Key pipeline Metrics

Global economic declines, as well as decreases in both domestic and incoming international travel, are weighing heavily on the lodging operating environment. They are impacting developer sentiment as well. As the current development cycle comes to a close, Construction Starts have descended to a lower channel due to falling lodging demand and the tightening of lending, and will remain at low levels through mid-decade. Project cancellations and postponements have been elevated, but will soon begin to fall as the Pipeline has now been mostly purged of its less feasible projects and those that are not easily financed. New Project Announcements are at cyclical lows. This lower channel will continue well after demand and room rates start to recover.

LE’s Forecast for New Hotel Openings

New Hotel Openings held at a historically high level in 2009, with 56 hotels/6,548 rooms coming online during the year.

LE’s Forecast expects New Hotel Openings to remain elevated in 2010, with 46 projects/6,045 rooms scheduled to open as new supply. However, declining Pipeline totals will begin to impact in earnest in 2011, when only 31 new hotels/3,462 rooms are expected to open. Lower levels of future new supply will aid the industry’s operat¬ing recovery, as there will soon be fewer guestrooms to absorb.


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Edited by Militza Richard


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