Hotel Industry Is on Brink of Major Expansion in Big Cities
Though it may seem counterintuitive at a time when many hotels around the country are having trouble filling their rooms, nearly 100 hotels are scheduled to open in major American cities this year.
New York will have the most new hotels, 46, according to Smith Travel Research, a hotel research company in Hendersonville, Tenn., followed by Houston, with 30. New hotels are opening as well in Atlanta, Boston, Chicago, Dallas, Los Angeles, Miami and Washington. That does not include new hotels opening in the suburbs of these cities.
So how can so many hotels be opening even though the economy and travel remain so slow?
The answer, according to Mark Lomanno, president of Smith Travel Research, is that 'hotel building cycles rarely mesh just right with economic cycles.' Planning a new hotel can take two to four years, and construction an additional one to four years. Most of the hotels getting ready to open were on the drawing boards several years ago, when the economy was healthy, demand for rooms was strong and room rates were rising quickly.
And once construction is under way, said Sean Hennessey, chief executive of Lodging Advisors, a New York consulting company, there really is no better alternative than to finish.
'Once you put the foundation in the ground and start with construction, from an investment point of view, it almost always makes the most sense to proceed, even if market demand appears shaky,' he said, 'because a completed and operating hotel can generate some revenue to defray development costs.'
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Source - New York Times
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