5 Important Trends Shaping Today’s Hotel Construction Market

By on April 30, 2018

From Building Design+Construction:  Open throttle.’ That’s how real estate giant Jones Lang LaSalle characterizes the global market for hotel deals in 2014.

Transaction volume in the sector is predicted to reach nearly $50 billion this year—about 10% higher than last year, which was more than 30% higher than the year before. Travel research consulting firm STR says nearly 3,000 construction projects were active at the beginning of 2014 in the U.S. alone, up 16% compared with 2013. The previous year saw a 48% increase.

Funding for hotel investments is easier to secure than it has been since the 2008 crash. Half of lenders recently surveyed by STR, RobertDouglas, and Hotel News Now expect their overall hospitality volume to at least match 2013’s strong showing, and 35% say they will increase hotel lending significantly or moderately. “It feels good out there in the market,” says Robert Stiles, Principal and Managing Director at RobertDouglas.

Many major cities worldwide have seen strong economic recovery that justifies lodging investments, and growth is moving into secondary markets, especially in the Americas and Europe, according to JLL’s “Hotel Investment Outlook: Global 2014.” However, conference and group business hasn’t reached pre-recession levels, and worries about the fairly soft world economy are making many players risk-averse. Cautious clients are asking their AEC partners for a high level of responsiveness.

“Costs continue to drive the market,” says Don Harrier, AIA, Principal and Senior VP, HKS Hill Glazier Studio.  “How quickly and efficiently a hotel can open is what makes that project attractive to an equity partner. The luxury market generally remains slow, while small, efficient, yet chic hotels in select markets, as well as large convention hotels in urban areas, are what’s hot. REITs are looking for acquisitions in key gateway cities. The movement is centered around existing assets—renovation and repositioning work—and less ground-up.”

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