Midprice without food and beverage and upscale hotels will grow supply at more than twice the rate of the overall hotel industry, according to data released by PricewaterhouseCoopers today.
With overall hotel supply growth estimated at 1.6 percent in 2007 from 2006 levels, the midprice without food and beverage tier will grow the most of any tier at a rate of 3.6 percent, the data indicated. PwC expects a nearly identical growth rate for upscale supply growth at 3.5 percent in 2007, more than double its 2006 growth rate of 1.7 percent.
The luxury tier, which had the highest growth rate in 2006, still will see an above-average increase in supply of 2.8 percent, as will the upper upscale tier, growing by 2.2 percent, PwC said. The economy tier will see nominal growth—0.2 percent—and the midprice with food and beverage supply is the only tier with a projected supply decrease, at a rate of 2 percent.
Overall, the growth rate is nearly three times the 2006 rate of 0.6 percent, as reported by Smith Travel Research. Even so, growth remains slower than in years past. "Although the total increase in supply is dramatic, an increase of 1.6 percent is still below the long-term average of 2.2 percent," according to Bjorn Hanson, principal with PwC's hospitality and leisure group.
Although many hotel chains have ambitious development pipelines, high construction costs are keeping many planned projects from breaking ground
(BTNonline, March 16). Construction costs affect midprice properties less, however, because they are cheaper to build and have lower operating costs.