Europe, Middle East and Africa Hotel Construction Continues to Decline in Q3

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(PORTSMOUTH, NH) -- According to a report released today by Lodging Econometrics, the total EMEA Pipeline continued its decline in Q3 2009, down to 1,396 projects/305,170 rooms. Project counts have fallen 21% from the Q2 2008 peak, and room counts by 18%.

Historically high New Openings, elevated Cancellations/Postponements and significantly reduced New Project Announcements into the Pipeline continue to shrink total counts in all regions. At the peak, Europe had the largest Pipeline, but is decelerating at the fastest rate. Today, the Middle East has the largest Pipeline room count.

EUROPE

The European Pipeline has steadily declined for 6 consecutive quarters and stands at 768 projects/133,175 rooms at the end of Q3. Pipeline counts are down 25% by projects and 23% by rooms from the peak in Q2 2008, and are the lowest counts recorded since Q1 2007.

The recessionary economic environment continues to hinder lodging demand, with occupancy rates down and room rates being heavily discounted. This and the lack of available funding for new projects have caused Pipeline counts to ebb dramatically. At 41 projects/6,164 rooms, New Project Announcements (NPAs) are at a cyclical low in Q3 and are expected to remain in a low channel. Five quarters of high Cancellations & Postponements have so far cleared the Pipeline of a total of 425 projects. This wave of high Cancellations does appear over, with 48 projects/6,926 rooms reported cancelled or postponed in Q3. Notably, 19 of these projects were already Under Construction. Cancellation of projects already Under Construction is often a sign of financing difficulties, which has been a growing trend throughout EMEA.

After peaking in 2008, New Hotel Openings are set to remain high through 2011. LE's Forecast for New Hotel Openings projects 237 new hotels/35,654 guest rooms will come online in 2009, with 213 hotels/33,659 rooms expected in 2010. With Pipeline totals declining significantly, the rate of New Hotel Openings will drop in 2011 to 149 hotels/27,802 rooms, and continue to trend downward for some time after.

MIDDLE EAST

The decade-long surge in Middle East Pipeline totals peaked in Q2 2008. Total Pipeline counts have declined in the five quarters since, and are now at 460 projects/140,061 rooms in Q3 2009, with projects down 17% and rooms 15% from the peak.

The impact of the global recession was late in coming to the Middle East, but now demand is off strongly and room rates have plummeted. This, combined with growing concerns over slowing economies and financing in the region, has dampened developer sentiment considerably over recent quarters. New Project Announcements, at 27 projects/8,553 rooms, are in a low channel that is expected to continue well into the next decade. At 24 projects/9,581 rooms, Cancellations/Postponements remain elevated, and may increase again in light of debt difficulties in Dubai. Meanwhile, New Openings will continue to accelerate through 2011 and further draw down Pipeline totals. LE's Forecast for New Hotel Openings calls for 77 new hotels/19,277 rooms in 2009. New Openings will then ramp up substantially with 98 hotels/29,226 rooms in 2010, 115 hotels/33,765 rooms in 2011, and then begin to recede thereafter.

Dubai has been the star of Middle East lodging development, however the price of such notoriety is high. On 25 November, the emirate announced that it is seeking an extension on $60 billion in debt held by Dubai World. This situation has been a growing concern for some time, with some resolution expected soon. Dubai currently has 105 projects/41,233 rooms in its total Pipeline, with 65% of those projects Under Construction.



AFRICA

While the Pipeline in Africa has been trending lower since its peak in Q2 2008, the declines are not as dramatic as in other parts of the world, as the resource-rich region has not been as seriously affected by global economic conditions. In Q3 2009, Africa's Pipeline totaled 168 projects/31,934 rooms, a 6% decline by projects and 13% decline by rooms from the peak.

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