Hotel construction spending soars

October 01, 2006 |

The hotel market remains the hottest nonresidential construction segment. The value of hotel construction starts is up 102% year-to-date through August, compared to the same period last year, according to Reed Construction Data. That increase is on top of a 22% jump in starts in 2005.

The surge is led by several large new projects in Las Vegas, but rooms are being added in most major urban markets, especially in resort destinations and in cities with generous convention center activity.

Construction spending at lodging construction sites in July was 80% higher than a year earlier. Hotel construction spending will rise 54% in 2006 and 20% more next year before retreating slightly in 2008. Conversions to condos, the New Orleans flood, and the abandonment of older hotels kept the supply of new rooms more than 40,000 short of added room demand over the past year. Revenue per available room increased nearly 9% for hotel operators in the last 12 months. With demand easing in a slower growth economy and the end of conversions to condos, the supply shortage will shrink quickly.

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