In its 2Q02 quarterly Guidance Report to its Wall Street analysts and corporate clients, LE reported that the number of rooms in the Total Development Pipeline has dropped below 300,000 for the first time in this cycle and is now down 49% from the high reached in the third quarter of 1998.

“This is further evidence that for 2003 and 2004, new supply additions to the nation’s guestroom inventory will be well below 2%. This substantially increases the potential for an accelerated improvement throughout the industry once the economy picks up momentum, guestroom demand recovers more completely and the ability to improve room rates returns,” said Patrick H. Ford, president of Lodging Econometrics.

At the end of the second quarter, the Total Development Pipeline contained 2,053 projects and 280,738 rooms, which includes those Under Construction, Scheduled to Start in the Next 12 Months and in Early Planning.

Quarter over quarter declines occurred across all stages of development and Chain Scales. Guestrooms Under Construction fell 9.8% for the quarter while those Scheduled to Start in the Next 12 Months dropped 4.1%, and those in Early Planning declined 12.4%. On a percentage basis, the greatest Chain Scale declines were in the Upper Upscale, Midscale with food and beverage and Economy segments, which fell 11.2%%, 22.7% and 20.8% respectively.

A low 222 new development projects having 27,725 rooms were announced in 2Q02, the smallest quarterly growth rate this cycle. Exiting the Pipeline in the quarter were New Openings of 227 projects with 26,429 rooms. This, coupled with 198 projects with 27,352 rooms that were either cancelled or put on hold by developers, resulted in an overall decrease of 203 projects with 26,056 rooms, or an 8.5% decline in the Total Pipeline for 2Q.

“Hotel developers continue to be concerned about the slow pace of the recovery, risk averse lenders and difficulty in obtaining appropriate R.O.I.s in their planned projects,” said Ford.

Development Pipelines declined in 19 of the 25 major markets, but in the cities where they occurred, the increases were of little significance. According to LE market analysts, Chicago, Boston, Orlando, Miami, San Francisco, Seattle, and New Orleans are of greatest concern since all either have higher than normal recent supply additions to absorb or will have new supply coming on line in the next 6 months. These are markets likely to lag behind the industry’s recovery.

Ford affirmed that LE’s latest findings are an accurate and reliable measurement of the industry’s planned development. Hundreds of developers contribute information directly to LE’s real estate specialists. Only active projects with dedicated land parcels are included in LE’s quarterly report. Start and completion dates are updated and verified continuously with project managers and contractors.

Lodging Econometrics, based in Portsmouth, NH, was the first company to organize the Development Pipeline for the hotel industry. It is an authority on the industry’s real estate Supply Side, reporting on the Census of Open and Operating Hotels, the Planned Development Pipeline and forecasting a calendar of New Supply Additions through 2004 and beyond. LE also tracks all Conversion/Reflaggings, announced Renovation programs and the Sale and Transfer of all Hotel Real Estate. LE reports are customized for every Market, Brand, Company and Chain Scale throughout the country.