Skift Take

Data is finally showing what all the major hotel company executives have been saying on the last few earnings cycles: Asia is going to lead the world in hotel construction activity coming out of the pandemic.

Skift’s Daily Lodging Report is a subscription-required, email-only newsletter read by anyone and everyone in the hotel investor, owner, and operator space, including CEOs of some of the industry’s top brands. With two separate regional versions, it covers everything from North America to Asia Pacific. The report itself, curated by founder Alan Woinski, boils industry news down to a quick, easy-to-read daily digest known for keeping readers up to date in an efficient, effective way.

Here’s a sampling of what the Daily Lodging Report provided to its readers this past week. If you’re not a subscriber, you should be. Don’t wait. Sign up now here.

Sunday, Oct. 17

STR said the number of US hotel rooms in construction is down about 48,000 from the country’s all-time high in April 2020 according to their pipeline data from September 2021. The final two phases of the pipeline, construction and final planning, are down by double digits from the same time last year while activity in the planning stage has jumped significantly. Year over year, STR said rooms in construction are down -20.3 percent to 172,251. Rooms in final planning are down -17.2 percent to 205,829 but there was a 41.1 percent jump in room in planning to 263,673. NYC led in rooms in construction with 17,985 with Atlanta a distant second at 5,844.

Skift Note: The construction slowdown builds on the argument more U.S. hotel deals coming out of the pandemic won’t involve as much new construction as previous development cycles.

Monday, Oct. 18

Top officials from the Chinese Center for Disease Control and Prevention said the country may open its borders by early 2022 if it vaccinates over 85 percent of its population by then. They believe China’s current epidemic control measures have won a lot of time to produce enough vaccines and inoculate people. They also believe the virulence of the Coronavirus is decreasing.

Skift Note: China’s borders potentially reopening is good news for hotel owners in major markets like Shanghai and Beijing, but keep in mind: The closed borders have also shown just how strong the country’s domestic travel base is. Chinese hotels don’t need to rely on international visitors.

Tuesday, Oct. 19

STR reported Asia Pacific showed an increase in the hotel pipeline activity at the end of 3Q21. In Construction rooms totaled 478,193, unchanged from September 2020 but rooms in Final Planning were up 5.3 percent to 178,195 and Rooms entering the Planning stage were up 16 percent to 288,227. Total Rooms Under Contract were up 5.4 percent to 944,615. STR said China had the most rooms In Construction at 295,989 followed by Vietnam, a distant second at 29,178. The Middle East & Africa region saw a decline of -7.8 percent in Total Rooms Under Contract to 238,435. STR said Saudi Arabi and the UAE lead in construction activity with 42,008 and 34.935 rooms In Construction, respectively.

Skift Note: Signs point to the hub of hotel construction moving away from the U.S. and into China.

Wednesday, Oct. 20

The number of new hotel projects is expected to skyrocket in Brisbane by 2032 after landing the Olympic Games. STR research found that in the past two decades the hotel supply in Games host cities grew markedly with a focus on upper and mid-scale rooms. The biggest number of new hotel rooms was in Rio de Janeiro in 2016 when Brazil hosted the Olympics just two years after the FIFA World Cup. The supply there increased by 16.8 percent, or 31,960 rooms. The problem is always the same. What to do with all those rooms after the Games have ended? In the case of Tokyo, it was a real disaster given Covid. Sydney only had a 4.1 percent increase with 39,125 rooms in 2000 but after the games ended, demand for hotel rooms only declined by 0.9 percent. STR said that on the back of the Brisbane Olympics, they expect new hotel developments to stretch from the Gold to Sunshine coasts in precincts surrounding proposed venues. An application for two towers, within the largely undeveloped area around the new Olympic stadium, with short-term accommodation was lodged in September. The athlete’s village in Hamilton Northshore will have more than a dozen towers which will be converted to residential apartments after the Games. The most recent hotel applications in the surrounding regions include the Wagner family’s 182-room hotel in Mooloolaba and Manors Gate Group’s 196-room slender tower in Broadbeach.

Skift Note: Hotel developers need a reminder: Do not build a hotel just for the sake of a major event like the Olympics. Real estate is a long-term (and costly) play.

Thursday, Oct. 21

Years from now we may all look back and wonder if the resort fee craze was really worth it? The District of Columbia Attorney General’s office accused Marriott International and its hotels of collecting hundreds of millions of dollars in resort fees from hotel guests over the last 10 years. The AG is suing MAR over what it alleges are deceptive pricing tactics related to the fees. MAR has denied intentionally misleading customers, saying it discloses resort fees before they book the room. The lawsuit against MAR is part of an investigation into the hotel industry’s pricing practices by AGs in all 50 states and DC. Nebraska’s AG filed a similar suit against Hilton in 2019.

Skift Note: Resort fees are loathed by guests and increasingly a financial life raft for hotel owners. But the government has a strong case and evidence as to why this practice is shady.

Baird said the global hotel brands have performed well since mid-August amid several tailwinds that have boosted investor sentiment. Ahead of 3Q earnings, they are taking a more balanced view of the sector and are not recommending new money be put to work at present. Wyndham is their Top Pick and Hilton remains their other Outperform name. Baird believes the valuation re-rating for the sector has occurred and earnings need to catch up to the stock prices before they would become more constructive on the group and/or recommend new month be put to work. Based on their conversations, investors’ bullishness appears related to Hyatt having the steepest/longest earnings recovery; the equity offering clearing a funding overhang and allowing investors to buy a recovery name well off its YTD high and a transforming business model with the Apple Leisure Group acquisition and recent/planned real estate dispositions.

Skift Note: This gives significant tailwind to the hotel conglomerate argument that bigger is better when it comes to recovering during the pandemic.

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Tags: daily lodging report, hotels

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