Hotel pipeline shrinks under cost pressures

While the hospitality industry continues to recover post pandemic, particularly in the commercial build and mergers and acquisitions sectors, we are seeing a drop in the number of hotels planned for construction.

The Asia Pacific region, in particular, is being hit hard by cost pressures, with the number of hotels planned for construction dropping by 30% on last year.

STR figures show the number of hotels under construction in the Asia-Pacific is down 4.4 per cent on March last year to a total of 905,000 rooms.

China leads the way in the region with almost 300,000 rooms being built.

Australia has a pipeline of 40,436 rooms on the horizon: 11,842 rooms under construction; 19,269 in planning, and 9325 in final planning.

According to STR research obtained exclusively by The Australian. This is slightly ahead of Vietnam, which has just over 36,358 rooms in the pipeline.

CBRE national director Wayne Bunz has questioned whether the hotels in planning stages in Australia will go ahead given extraordinarily high costs.

“I don’t know how construction costs would make it work unless there’s a great change in prices coming down,” Bunz to The Australian.

JLL head of investment sales Peter Harper questioned whether Australia needs more hotels.

“Since this time we’ve seen considerable increases in new supply, much of which has been skewed towards the upper-upscale and luxury end of the chain-scale, and this product has had a significant positive impact on rate ceilings,” Harper said.

“While most markets have now achieved a full RevPAR recovery, this has been largely average daily room rate driven, with a full occupancy recovery still to play out. The question of whether Australia needs more hotels can probably only truly be answered at this time.”

This is not just an Asia Pacific problem. STR research gained exclusively by The Australian shows four of the world’s regions have seen a year-on-year drop in hotel construction.

Notably, the Asia-­Pacific pipeline was closest to its 2022 comparable.

Jonathan Jackson, 27^th April 2023