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Modest Development Decline

By Dennis Nessler | December 22, 2020

Not surprisingly new development has been impacted by the ongoing pandemic and subsequent reduction in hotel demand, however, the drop-off in projects has been relatively modest thus far in 2020, according to JP Ford, SVP, Lodging Econometrics.

Ford addressed the current hospitality development landscape as well as the industry’s prospects for a rebound during last week’s “ALIS 6×8: Recovery Top Of Mind” virtual event.

In describing the pandemic as a “black swan” event for the lodging industry, Ford explained how this economic downturn has not necessarily resembled some of the previous recessions, particularly from a development standpoint.

“What’s different about this is we have not seen the rapid decline in the pipeline and there’s been a fair amount of patience in the lending community about taking action,” he said.

Ford noted that through the first three quarters of 2020 there were 5,282 active projects in the pipeline, which represents a reduction of some 460 projects in development compared to 2019, according to Lodging Econometrics. That reduction has resulted in an 8 percent decrease in both rooms and projects from last year.

“We thought we would see more cancellations and more postponements, but I think what the development community has done is really taken a wait-and-see attitude. They have had a lot of patience with determining the timeline for their projects going forward so that’s been very encouraging,” he said.

While he acknowledged a further downtick in development is likely when Q4 numbers are in, Ford put the big picture in perspective. “This could have been a lot worse from a pipeline perspective than it ended up being,” he noted.

According to Ford, Dallas, Los Angeles and New York are the top U.S. markets in terms of development pipelines. He pointed out that each of those markets has more than 140 projects in various phases of development.

Looking ahead, Lodging Econometrics is forecasting 960 hotel openings representing some 113,000 rooms in 2021. Ford added, “I think in the second half we may begin to see some uptick in the number of projects in the pipeline.”

Ford, meanwhile, cited “more efficiencies” in terms of operating as one of the more encouraging hospitality trends.

“A lot of management companies, or individual managers at the hotel level, have really learned how to be more efficient. It’s probably been a long time since they’ve had to do that, but this is a great exercise for them to have to think about, walk through, put pencil to paper and figure out what the new normal is going to be,” said Ford, further adding he believes there is “pent-up demand to travel” as well.

Ford also emphasized the role of the vaccine in a potential recovery.

“I’m very much attuned to the rollout of the vaccine. I’m hoping that we as a country make that as smooth a process as possible. I think getting that out and getting people vaccinated is one of the keys to getting travel kick-started in the country and it will lift all boats,” he said.

 

Credit
Dennis Nessler
Editor-in-Chief

Dennis Nessler is Editor-in-Chief of Hotel Interactive, parent company of Hotel Community Forum. Nessler brings more than 28 years of editorial experience to his position, including some 17 years in the hospitality industry. As part of his duties, Nessler not only covers the industry editorially but moderates various high-level panel sessions at hospitality events and frequently conducts one-on-one interviews with C-level executives.


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