Lodging Econometrics Reports EMEA Pipeline Growth Muted

Pipeline Growth Muted As Developers Await Further Economic, Operational & Financing Improvements
Europe’s Construction Pipeline is at 790 projects/125,296 rooms at the end of Q1. The United Kingdom has the largest country Pipeline in Europe, with 26% of its total projects. At 208 projects/27,607, the UK Pipeline has grown 1% by projects, but decreased 5% by rooms year-over-year (YoY). All other European countries combined have seen a 9% increase in projects and 3% increase by rooms YoY.

The rapid recessionary declines in Europe’s Construction Pipeline have abated. The Pipeline is in a lower bottoming channel for a fifth consecutive quarter and will likely remain there until the sovereign debt crisis eases, national economies show a more vigorous recovery, improvement in hotel operations accelerates, and construction financing becomes more available. In the meantime, over half of Total Pipeline projects and rooms are now Under Construction, with many set to exit the Pipeline as New Supply during the next two years. This will continue to draw down Total Pipeline counts, as difficulties in securing construction financing will keep New Project Announcements at low levels.

The Total Pipeline for the Middle East, at 425 projects/114,618 rooms in Q1, is down 2% by projects and 5% by rooms from Q1 2010. The region’s two largest Pipelines, Dubai and Abu Dhabi, have an extremely high 68% and 65% of projects Under Construction. Many of Dubai’s projects have had construction delays due to financing difficulties and downsized construction crews and, as such, are not moving aggressively toward completion. As a result, the openings for these projects are now spread out over the next 2-3 years. Combined with continued low New Project Announcements, this will rapidly deplete the Pipelines in these Emirates, which will enter a lengthy period of guest room absorption. Pipelines in other Middle East countries have also bottomed and might trend downward further due to growing political and civil unrest.

Africa’s Total Pipeline of 190 projects/37,141 rooms has been trending upward incrementally for three consecutive quarters and is up 7% by projects and 10% by rooms from Q1 2010. Morocco (64 projects/11,955 rooms), Nigeria (19 projects/3,937 rooms) and South Africa (17 projects/2,492 rooms) account for 53% of the region’s total projects and 50% of rooms. The recent escalations in political and civil unrest in Libya, Tunisia, Egypt, and recently in Morocco could dampen development activity in Northern Africa in the future.


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