HVS has tracked hotel construction costs throughout the United States since 1976. The survey considers data for six lodging types: Economy/Budget Hotels, Midscale Hotels w/o F&B (without Food and Beverage), Extended-Stay Hotels, Midscale Hotels w/ F&B (with Food and Beverage), Full-Service Hotels, and Luxury Hotels and Independent Resorts. This year, the time period for the survey has been expanded to include data from the first half of 2009; as such, the 2009 hotel development survey reports updated per-room development costs for 2008/09.
Each year HVS Consulting and Valuation researches development costs from our database of actual hotel construction budgets, industry reports, and uniform franchise offering circulars. These sources provide the basis for our range of component cost per room. New project construction cost data collected each year may increase the range and/or impact the mean and median of the construction cost components. The upper and lower ends of the ranges are adjusted by changes in construction cost components derived from published sources and information from architects, contractors, developers, lenders and other professionals involved with hotel development projects.
The survey is not meant to be a comparative tool to calculate changes from year to year but represents the true costs of building hotels across the United States. As with previous years' data, the data represent a wide variety of geographical locations from tertiary markets in the Southwest to mid-Manhattan. The development costs of the same hotel product, say a select-service Fairfield Inn or Holiday Inn Express, can be more than triple the amount from one locale to the other.
A Period of Changes
The last eighteen months can be regarded as a period of changes and challenges. For most markets, the first three quarters of 2008 reflected a continuation of the strong performance trends from the prior three years. Occupancy had been stabilizing and many operators had been able to increase rates over those of 2007. By mid-year 2008, many business and consumers were feeling the impact of the contracting economy and corporations and individuals tightened their travel spending. With the darkening cloud of the credit crisis and the implosion of Bear Stearns and Lehman Brothers, travel in the U.S. severely contracted-almost overnight. The RevPAR declines beginning in the second half of 2008 and continuing through 2009 have challenged the whole outlook of the hotel industry.
The impact of the industry's operating performance on hotel development has been notable. Over the course of 2009, the declining operating performance of hotels and the continued constriction of available debt have resulted in the stoppage, postponement, and cancellation of numerous projects across all hotel product types. While a significant number of planned hotel projects have been put on hold or cancelled, a large amount of new supply is still moving through the pipeline. Because of the timing of development projects, the impact on supply growth will not be manifested in some markets until 2010/2011. As seen in the following chart, the mid-year supply growth for 2009 is still within the range of new supply growth from prior years.
External source: To read complete article 'Click Here'