Global Credit Crisis to Hit European Hotel Pipeline by Mid-2008 – Report

29th February 2008 (Last Updated February 29th, 2008 11:32)

Despite an increase in projects in the construction pipeline in Europe in the last quarter of 2007, the global credit crisis is likely to have a negative impact in the coming months, a recent report says. Lodging Econometrics' (LE) 2008 Outlook for the Lodging Industry in Europe

Despite an increase in projects in the construction pipeline in Europe in the last quarter of 2007, the global credit crisis is likely to have a negative impact in the coming months, a recent report says.

Lodging Econometrics’ (LE) 2008 Outlook for the Lodging Industry in Europe says there was an 11 percent increase to 949 projects in the final quarter, up from 854 projects in the third quarter.

LE says 50 percent of the pipeline, representing 475 projects, or 82,076 rooms, are already under construction, while 27 percent of the pipeline – 257 projects – have yet to make a branding selection.

In 2008, 289 hotels are forecast to open in Europe, followed by another 348 in 2009 – adding 98,199 rooms to the European market.

LE President Patrick Ford says the development boom follows a period of sustained prosperity.

“Hotel occupancies, in the high 60’s and 70’s, are at or near peak levels in many urban centres and resort destinations,” he says.

“Room rates have been strong, pushing revPAR growth rates into double digits in many markets.

“These lodging indicators are driving developer interest.”

LE says the global credit crunch is beginning to impact the European property market, with banks tightening lending policies.

“Only smaller hotel projects are being considered [for finance], and then only for the most qualified and experienced developers,” the report says.

“Larger equity investments are required and other lending terms have stiffened considerably.”

By mid-year, LE expects the number of new project announcements in to the pipeline to wane.

“Those projects already in the pipeline, but without financing could experience some problems securing funding.

“Because more equity will be required, some developers will need time to search for additional partners, which could prompt project delays and a flow of cancellations,” LE says.

By Elizabeth Clifford-Marsh