Despite the current boom to the hospitality industry brought on by the Olympics in London, most would agree that conditions elsewhere in Europe are worrying to our industry in general. But what affect are the economic conditions in the EU having on the hotel construction pipelines in the Asia Pacific and Middle East regions?
Lodging Econometrics has kindly shared their construction trends for the industry as of Q1 2012.
Asia Pacific
Overall, Asia Pacific as a whole isn’t looking too bad. The total pipeline Q1 2011 to Q1 2012 has the number of projects up by 7% and the number of rooms up by 10%. Interestingly, from the Q3 2008 peak of 2024 hotel projects (477,849 rooms), the totals for Q1 2012 are 2192 projects an 8.3% increase and 561,256 rooms an increase of over 17%
Both hotel construction starts (371 projects / 72,556 rooms) and new hotel project announcements (382 projects / 73,648 rooms) are trending up this quarter from Q1 2009, however, LE’s forecast for New Hotel Openings in 2013 at 547 hotels and 147,131 rooms is the lowest in the past four years.
China and India are the two largest pipelines in the region with 65% and 17% of the total hotel projects in the Asia Pacific pipeline.
It’s not all smooth sailing in these two markets, however, as India’s total pipeline is 9% down in both number of projects and rooms against the same period last year. Starts in the next 12 months are up (12% / 6%) but early planning is weak at about 24% down on last year.
Meanwhile in China, the pipeline currently under construction looks to have healthy growth with a 28% increase in both number of projects and rooms but the future doesn’t appear to be so promising with projects due to start in the next 12 months down a whopping 50% versus last year and early planning looking sick at 27% off last year’s figures.
The chatter around seems to be focused on reduced availability of funds and government assistance as being the cause. We are always interested to hear your thoughts on what’s playing into this phenomenon and whether this is just a speed bump in the juggernaut that is China or the start of the boom being over.
In summary, Bruce Ford from LE says, “we are still seeing a 10% annual growth rate for new rooms across Asia Pacific.” He went on to add, “Demand is growing but slowing, the opportunity is now!”
Middle East
Moving onto the Middle East, here the pipeline is smaller overall than Asia Pacific with a total of 383 projects and 108,647 rooms –down 10% and 6% versus the same period last year. The region has never regained those heady days prior to the GFC in 2008 with the current pipeline 29% down on projects and 32% less rooms than the peak in Q3 08.
When Bruce said the opportunity is now he could have also been talking about the Middle East, LE’s forecast for New Hotel Openings for the balance of 2012 is 65 hotels / 20,054 rooms (remember these are Q1 2012 figures) and for 2013 is 75 hotels and 19,597 rooms Both of these figures are significantly up from the previous two years.
When Safemark was at The Hotel Show back in May the feeling was that a lot of the projects that had been stalled since 2008 were underway again and coming up for completion. Ultimately, business seems to be moving across the UAE and firing up in Saudi Arabia.
While the overall trend still seems to be downward, metrics such as construction starts, cancellations and postponements, and new project announcements swing widely over the past three years. With the political turmoil in area and the recession in the EU, this is certainly an area to be watched.
If you would like a copy of the charts, drop me an email at jferris@safemark.com and I’ll forward them through.
