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Pipeline Widens For Upscale, Select-Service Hotel Chains
By Michael B. Baker
JULY 23, 2007 --
Supply growth is rebounding after several years of sluggish development in the hotel industry, particularly in the select-service and upscale tiers, which are of the most interest to corporate travel buyers.
Bjorn Hanson, principal of PricewaterhouseCoopers' hospitality and leisure group, said the forecast for 2007 is a 1.6 percent increase in supply, still below the long-term average of 2.1 percent. By 2008, however, supply growth should be above average, at 2.3 percent, he said. Anecdotal evidence suggests some of the construction factors clogging the pipelines in past years are beginning to be resolved, he said.
"The lengthening of project timing was partly a factor of Katrina and hurricane damage, and it took a lot of projects a while to get restarted after 2001, but I think we're working our way through that," Hanson said. "That trend may be reaching its peak."
Hotel Brand Growth Plans
InterContinental Hotels Group, which already claimed the industry's largest pipeline, recently announced it signed 23,000 more rooms, bringing its total pipeline to about 170,000 rooms, with more than 99,000 in the United States. A good portion of those new rooms will be Holiday Inns and Holiday Inn Expresses, but the upscale brands are growing rapidly as well.
"As a global company, we've been very successful in expanding all seven brands," said IHG's Kirk Kinsell (see story). "We're expanding the pipeline with new construction, and our upscale and luxury brands are primarily focused on markets that are mega or primary cities."
IHG calls its Crowne Plaza chain the fastest-growing U.S. upscale brand, with 28 hotels it is adding to 158 Crowne Plazas in the Americas. The InterContinental brand recently opened new properties in Los Angeles and Boston, Kinsell said, and 40 more are on the way globally. The new boutique Hotel Indigo brand also is set for growth, with eight open and 45, with more than 7,000 rooms, under development.
Starwood Hotels & Resorts has firm plans to open about 420 new hotels globally, boosted partially by the introduction of its new select-service Aloft and extended stay Element brands, senior vice president of development Paul Sacco said. More than 25 hotels in those two brands should open next year alone, he said. Overall, Starwood expects to sign 200 new deals and open 80 new hotels in 2007. "It's almost double the number of properties that we opened last year," Sacco said. "Both the Element and the Aloft hotels are completely new. We don't do conversions of existing hotels. We built these brands from the ground up."
Besides overseeing the rapid growth of its new select-service Hyatt Place brand, Global Hyatt Corp. is pursuing global expansion plans for its upscale and luxury brands. It claims about 20 on the way in the Asia/Pacific region in the next few years, more than a dozen in Europe and the Middle East, two in Latin America and six in North America and the Caribbean.
Marriott International opened 52 new properties with 6,976 rooms worldwide in the second quarter of 2007. Its pipeline now stands at more than 110,000 rooms, with about one-quarter of those outside of North America, Marriott CFO Arne Sorenson recently told investors. So far, supply growth has hurt Marriott's bottom line only in a handful of suburban markets, he said.
"While there is more conversation about increasing pipelines," Sorenson said, "in the full-service segment, supply growth seems very modest."
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