Boom Hotel Deathwatch
posted by July 31 at 15:28 PMon
It’s a bad time to build hotels, according to a story in today’s NYT. High gas prices, more expensive airfares, fewer flights, and the advent of the staycation are keeping down occupancy rates. But the cranes are still going up.
The industry now has about 6,000 new hotels, with nearly 800,000 rooms, under development, a 27 percent increase from last year, according to Lodging Econometrics, a consulting firm in Portsmouth, N.H. About 2,000 of those hotels are already under construction, and construction is scheduled to begin on many more in the next year….
But perhaps more telling is the number of projects called off in the last three months — 327 — after investment banks like Lehman Brothers, UBS and Merrill Lynch began to reduce financing for new construction, according to Lodging Econometrics. It was the highest number of cancellations since immediately after Sept. 11.
Construction will certainly halt in some of the most obvious tourist destinations—such as Vegas, Hawaii, and beach towns—but what’s going to happen in Seattle?
Prospective demand for more hotel rooms has driven many developers to propose hotel-condo hybrid towers—for example, the Candela Hotel and Residences, the AVA tower, the ID Building, the tower on 2nd and Virginia, and the Heron & Pagoda Towers. Those projects haven’t broken ground, but 1 Hotel & Residences, which broke ground and stalled, leaving a hole on 2nd Avenue, is overhauling its luxury hotel concept.
Meanwhile, local realtors, developers, and economists foresee that demand for condos here will resume in a few years, just as the supply from buildings currently under construction runs dry. So I’m guessing we’ll see a pre-building conversion wave—in which hotel plans will be scrapped and replaced by condos.