August 11, 2010

The erratic lodging market has had a more pronounced pause in recovery than the office market. January spending was 18% below the peak 2003 month last May. Annual spending was unchanged in 2003 and will be only slightly higher for all of 2004 even though spending is expected to be rising at a double-digit pace for most of this year.

A 15% spending gain is expected next year followed by a probable pickup in spending growth in 2006 during the mature phase of the spending cycle. This is typical. Construction spending doubled in this market during 1995-96 and increased by a third in 1997-98.

Hotel occupancy rates and room rates have been rising steadily since last summer, especially for resort and luxury properties. This trend should accelerate in response to higher consumer confidence, employment, airline passenger traffic, corporate profits, and foreign tourism.

The recent construction slowdown is partly due to steep price increases and spot shortage problems with both steel and oriented stand board. Supplies will stay tight all year, but contractors will soon be able to get better prices and delivery dates. Project delays have also been aggravated by recent declines in consumer confidence, temporary fallout from criticism of the Bush administration's economic record during the primary season.

Lodging construction spending
(Billions of dollars, seasonally adjusted rate)


Quarter Year $
1 2004 10.2
2(f) 2004 10.7
3(f) 2004 11.1
4(f) 2004 11.4
1(f) 2005 11.8
2(f) 2005 12.2
3(f) 2005 12.6
4(f) 2005 13.2
Source: Department of Commerce Forecast (f): Reed Research Group

         
 

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