Hoteliers Plan Substantial Construction Despite Demand Slowdown

Multibrand hotel companies in recent weeks have detailed ambitious pipeline expectations, despite demand softening and growing concerns about the economic outlook, particularly for expansion internationally where revenue growth remains stronger for the companies.

Bjorn Hanson, PricewaterhouseCoopers' hospitality and leisure group principal, told Business Travel News this week that the forecast for supply growth has not changed, remaining at 2.1 percent. Although that's about equal to the long-term average, it's the highest level of growth the industry has seen since 2001, according to PwC.

Carlson Hotels Worldwide this week announced that, during the first quarter of this year, it signed franchise agreements for more than 50 new properties across its brands, spanning 19 countries. These include 18 of the midprice Country Inns & Suites—10 in the United States, seven in India and one in Canada—14 Radisson Hotels & Resorts across 10 countries as well as two new Radissons to be managed by Rezidor Hotel Group, ten new Park Inns across eight countries and one of its luxury Regent brand, in Manila Bay, Philippines. CEO Jay Witzel said Carlson's intent was to continue with aggressive expansion throughout the year.

Also this week, InterContinental Hotels Group said that it signed 19,678 new rooms during the quarter, bringing its total pipeline to 1,720 hotels, or 231,553 rooms. In particular, IHG signed five new agreements for its upscale flagship property, including three in the Americas, as well as the first of its budding midprice Hotel Indigo brand outside of the United States, a location in London. IHG's upscale extended stay brand, Staybridge Suites, signed a new property in the Middle East and expects to opens its first property out of the United States, in Liverpool, England, this June.

Starwood Hotels & Resorts recently reported 43 hotel management and franchise agreements, representing 13,000 rooms, signed in the first quarter of 2008. These additions bring its pipeline to 120,000 rooms, 70 percent in its upper upscale and luxury brands and more than half outside North America. This year alone, Starwood said it expects to open up to 100 new hotels and sign more than 200 management and franchise contracts.

Marriott International last month said its pipeline stood at more than 130,000 rooms at the quarter's close, more than 40 percent of those already under construction. Development of its luxury and upscale brands has a largely international focus, with 60 percent of its full-service pipeline located outside of North America, according to Marriott. Its midprice pipeline, meanwhile, has grown to 79,000 rooms and is positioned to grow further, the company said.

"Many of our larger limited service franchisees are well-positioned to reinvest in the sector," Marriott CFO Arne Sorenson said in a conference call to investors. "They are able to secure financing through local banks with which they have relationships and are optimistic about the business and about Marriott brands."