The number of US hotel projects in development fell 26 percent in July, another illustration of how the financial woes of the industry have curbed growth, Smith Travel Research data showed this week. "That is a drop that we haven't seen since we started tracking ...," said Jan Freitag, vice president of global development at Smith Travel, which started following the lodging pipeline in 2002.
The number of hotel projects under construction or in initial or final planning stages fell to 4,554 hotels in July. Smith Travel only includes hotels with 15 rooms or more in its analysis. That drop is due to weakness in the hotel industry, which leaves banks and investors reticent to finance the building of a hotel, Freitag said.
Major hoteliers, including Marriott International Inc and Starwood Hotels & Resorts World-wide Inc cut their full-year earnings outlook last month amid expectations of sluggish demand. Revenue per available room, a key gauge of fiscal health, is off 16.1 percent so far in the third quarter, according to a recent data analysis by Susquehanna analyst Robert LaFleur.
"The rapid deterioration in RevPAR makes it not as attractive," Freitag said. But another major factor in the decline is investors' reticence to tap into the commercial mortgage-backed securities market, which helped finance the building and acquisition of hotels in boom times.