|Europe, Middle East and Africa
Lodging Real Estate Trends – Executive Summary
LE Releases its 2014-15 Forecast for New Hotel Openings.
In its fall report, LE released for the first time its 2015 forecast for New Hotel Openings for Europe, the Middle East and Africa, along with a revision for 2013 and 2014.
In Europe, LE expects a cyclical low 201 hotels having 37,516 rooms to open in 2015. Reflective of a declining Pipeline, 201 new hotels would be the lowest new opening hotel count in the seven years that LE has been tracking the European Pipeline.
New Supply coming online in the Middle East is on the rise. New Hotel Openings in 2015 is forecasted to accelerate to 84 projects/ 23,478 rooms from the cyclical low set in 2012 as the recovery from the recession strengthens. Projects in the Pipeline have begun to migrate forward, as financing availability has loosened in Dubai and Abu Dhabi. Strong Pipelines in Saudi Arabia’s major cities are also set to unfold.
In Africa, improvements in financing availability have lead to a faster migration forward for projects already in the Pipeline. In 2015 46 hotels/ 9,182 rooms are expected to open, an increase off the cyclical bottom established in 2011.
EMEA’s Construction Pipeline at Mid-Year
Europe’s Construction Pipeline continues to trend downward and stands at 750 projects/ 130,551 rooms at Q2 2013. 750 projects represent a 2% year-over-year (YOY) decline and is the lowest project count since the Pipeline bottomed in Q3 2010. Overall, Pipeline growth has been slow to recover as the economic and political agendas have largely been austerity driven, not growth oriented.
Future New Project Announcements are expected to be slow. Economic improvement and growth of the Pipeline can not occur until Europe’s financial institutions are repaired, lending is more available and governmental policies turn toward growth.
Although the United Kingdom has the largest Pipeline in Europe, it set new Pipeline lows at the end of Q2. 137 projects/ 19,306 rooms is down 54% and 56% respectively from the peak in Q2 2008. London has the second largest city Pipeline in Europe and is slowing as well. 12 New Hotels will open in 2013, down from 34 in 2012. Thereafter, New Openings will fall into single digits.
Russia has the second largest Pipeline and is about to unfold. Just 9 Hotels Opened in 2012, 25 are expected to open in 2013, 40 in 2014 and 34 in 2015. Moscow has the largest city Pipeline in Europe at 33 projects/ 8,581 rooms.
Turkey has been one of the fastest growing emerging markets and has the fifth largest Pipeline at 58 projects/ 11,564 rooms, an all time record high. Istanbul has the third largest city Pipeline at 27 projects/ 6,486 rooms. LE expects the future pace of New Project Announcements to decline as events in the last six months are affecting economic growth. A precipitous fall in the Turkish lira, the flight of foreign investment, political unrest and a threat of foreign intervention in neighboring Syria are significant new hurdles for the Turkish economy.
The Total Pipeline in the Middle East set a new five year low at the end of Q2 2013. At 278 projects/ 81,043 rooms, it’s been trending downward for five years and is now off 50% from the peak established in 2008. Development is concentrated in just a few countries, which are recovering nicely from the financial crisis. Lending has returned and as a result, the forward migration of projects already in the Pipeline is accelerating. In 2015 New Hotel Openings is forecast to be 84 hotels/ 23,478 rooms, over two and a half times greater than the cyclical bottom set in 2012.
Saudi Arabia has a huge Pipeline, 77 projects/ 24,774 rooms, all world-class high-end developments averaging 322 rooms per project. New Openings are expected to accelerate from 5 hotels in 2012 to 11 this year, 21 in 2014 and 27 in 2015. Upward trends for New Openings are also forecast for Dubai, Abu Dhabi, Qatar and Oman.
The emphasis for the next few years is likely to be on absorption of the new supply before there is much pick up in New Project Announcements.
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LE’s Construction Pipeline Trend Report encapsulates all US lodging development activity, with hotel project and room counts for the Pipeline by stage (Under Construction, Starts in the Next 12 Months, Early Planning), as well as for LE’s proprietary Three-Year Forecast for New Hotel Openings with projected supply growth rates. Two years of Prior Hotel Openings and current supply counts for Open and Operating Hotels (Census) are also included.
This macro-overview is essential for assessing future supply growth for strategic planning and decision-making.
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