[New] Hotel Construction Pipeline Global

Despite regional variation in performance, new hotel development remains steady according to the latest research from THP. The database currently shows a total of 7,383 hotels in the pipeline globally, accounting for more than 1.5 million rooms.

By region, Asia Pacific is the most active with 2,695 projects signed, followed by North America (1,855 projects) and Europe (1,844 projects). Honing in on individual countries, China, USA and UK top the listings, while Spain rises up the ranks following a surge in development across urban and coastal destinations; SLS Barcelona, Nobu Hotel San Sebastian and Four Seasons Hotel Formentor will open through 2023 and 2024.

Cementing its spot in the top ten, Saudi Arabia is moving at a record-breaking pace as it pushes forward with its grand Vision 2030 plan; the pipeline currently stands at 62,977 rooms across 168 projects. From The Red Sea Project, Neom and Qiddiya to Amaala, AlUla and Diriyah Gate, the country’s so-called giga-projects form a sizeable chunk of the US$7 trillion set to be invested by its government, with luxury hotel brands flocking to the sites – as well as cities like Makkah, Madinah and Riyadh – to capture increasing tourist arrivals.

With over 500,000 rooms set to enter the market globally in 2023, there’s clearly no let-up in demand for luxury hotel development.

Top Cities

DUBAI Projects 100 Rooms 23,976

LONDON Projects 93 Rooms 17,194

SHANGHAI Projects 66 Rooms 15,186

CHENGDU Projects 62 Rooms 11,923

SHENZHEN Projects 59 Rooms 11,545

NEW YORK Projects 54 Rooms 12,328

GUANGZHOU Projects 53 Rooms 10,971

RIYADH Projects 47 Rooms 9,598

DUBLIN Projects 45 Rooms 6,777

BANGKOK Projects 43 Rooms 10,994

Top Countries

THP is a data service to support the design, build, furnishing and operation of hotels worldwide.

For more information visit: www.tophotelprojects.com

Projects Rooms Projects Rooms

CHINA 1,544 343,664

USA 1,522 295,165

UK 418 59,874 1 2 3 4 5 6 7 8 9 10

SPAIN 170 23,350

SAUDI ARABIA 168 62,977

GERMANY 304 47,249

VIETNAM 142 56,011

UAE 135 35,116

INDIA 187 28,837 AUSTRALIA 173 29,510

Construction Phase

VISION Projects 180 Rooms 42,920

GROUPS AND BRANDS

PLANNING PROJECTSROOMS

350 Projects 461 Projects 475 Projects 723 Projects 857

Projects

CONSTRUCTION Projects 3,202 Rooms 702,110

PRE-OPENING Projects 540 Rooms 107,275 BRAND

Hilton Hotels & Resorts 12039,843

Hilton Garden Inn 10922,730

Marriott Hotels & Resorts 9928,199

Hampton by Hilton 9814,444 Hotel Indigo 8815,851

Doubletree by Hilton 8718,612

Hyatt Place 8715,221

Courtyard by Marriott 7613,893 Hyatt Regency 7421,434

Home2 Suites by Hilton 7410,746

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Back to the future

Major hotel groups have declared their businesses in rude health, as they delivered third quarter results.

Slimmed down after the pandemic, they are now reaping efficiency savings, as business bounces back across all markets except China. For now, none can spot any evidence of consumers pruning their hotel expenditure, while returning group business and corporate travel are expected to continue rising into 2023, offsetting cost headwinds.

Typical of the temperature were these comments from Marriott International CEO Tony Capuano: “We have yet to see signs of a slowdown in global lodging demand. In fact, we have seen just the opposite - booking trends remain very healthy.”

At Hilton Worldwide, CEO Chris Nassetta pointed to a survey of customers, which found 85% of business travellers hope to travel as much or more next year. “Despite near-term macro headwinds, we’re not seeing any signs that fundamentals are weakening. Rising demand, coupled with historically low industry supply growth, should continue to drive strong pricing power. We are in the midst of a rebound with secular tailwinds that should support growth.”

With cash flowing in, acquisitions are in the air. In October, Marriott spent USD100m acquiring Hoteles City Express, giving it an additional 152 hotels, largely across Mexico. It marks a new presence for Marriott in the ‘affordable midscale’ segment, delivering new brands City Express, City Express Plus, City Express Suites, City Express Junior and City Centro. Marriott says it will expand the brands in Mexico, across central and Latin America, and in future, further afield.

“We are bullish on the moderately priced midscale space, which has meaningful growth potential,” Capuano told analysts. “We are incredibly excited about the opportunity to expand in this segment in CALA, as well as other locations around the world.”

Wyndham, which acquired Vienna House in Europe during the period, has also now named its new brand, Echo Suites, which already has more than 120 committed US development sites.

Hyatt, too has been in acquisitive mode. A deal with European hotel group Lindner has given it substantially more presence in Europe - albeit this particular deal is, effectively, a franchise agreement.

There are concerns that a tightening financing landscape could hit the progress of some new hotel developments. But that concern is not sufficient to have the big groups changing their views on support for landlords.

“I don’t see our tried-and-true philosophical approach to investment in projects changing even in this environment,” said Marriott’s Capuano. “Certainly, the competitive environment gets more competitive by the day, but we will apply the same disciplined lens that we’ve applied in the past.”

Wyndham CFO Michele Allen was a little more generous: “We are really pleased with what we are seeing from a key money perspective. We are at the table today on deals that we hadn’t previously been invited to participate in. So, using the balance sheet to incentivise owners to our brands is really bearing fruit for us. I do expect the allocation to key money will increase slightly as we move through the seating of the Echo brand, but nothing that’s going to materially draw away from our ability to either invest in inorganic growth opportunities or capital allocation to share repurchase.”

Also back to normal is the approach to brand standards. These were relaxed during the pandemic - with such issues as daily room refreshes set aside, while everyone was concerned about catching Covid. But, said Capuano: “We obviously have brought back all of our quality metrics, so our QA audits, our brand standards. You might think that the owners would baulk at that. I think quite the contrary. They care deeply about their neighbours within the portfolio and continue to encourage us to bring back and enforce those standards.

“And then similarly, we obviously gave our owners and franchisees a measure of relief on renovation cycle at the very bottom of the trough of the pandemic. We’re bringing those requirements back but with some pragmatic perspective on hotels that are doing a terrific job on service, as evidenced by those quality metrics and giving them the ability to selectively extend some of those renovation cycles.”

Ha Perspective

By Chris Bown: All of the big brand chief executives are declaring a bright few months ahead. But, with shorter booking windows among both leisure and corporate customers, there are fears they are deluding themselves in the manner of a ship’s captain staring at a fog bank off the bow.

It’s been a characteristic of the post-pandemic recovery, that plenty of consumers have money, and are keen to travel. Questions remain about how long this reserve of money will last. Set against this are economic concerns, though there are plenty of economists predicting a relatively short inflationary and interest rate spike, which may fizzle out within a year. If - and it’s a big if - the Ukraine situation gets resolved, then the bumps in the road of 2022 will soon be forgotten.

With the profits flowing in once more, there’s the question of where to spend. American CEOs – as they’re typically rewarded with share bonuses - love buying back shares, and there’s debt to be paid down too. But surely the bigger prize has got to be M&A. Hyatt set the bar high with its Apple deal, and Choice Hotels followed with its Radisson Americas acquisition. In comparison, Wyndham’s acquisition of Vienna House, and Marriott’s new Mexican deal, are small fry.

Bigger opportunities may well await. Club Med owner Fosun, for example, is looking to sell down assets to cover debts - and based on Hyatt’s experience, who wouldn’t love to add an allinclusive brand to their portfolio?

Ha Perspective

By Andrew Sangster: There is a real puzzle around Accor’s share price. Nobody can explain why it has failed to recover like its peers. It is a company most people seem to regard highly and yet its share price continues to lag.

Morgan Stanley said after Accor’s results that it was trading on 10 times EV / EBITDA against the 11 to 14 times of its equivalents. The share price yearto-date was down 19% against 14% for peers.

Accor’s results were good, with RevPAR stronger than IHG, Marriott and Hyatt, but not Whitbread nor Melia. And when it comes to net unit growth guidance, Accor at 3.5% was ahead of Marriott’s 3% but behind Hilton’s 5% and Hyatt’s 6.5%.

What may help is the big reorganisation of Accor into two units, one that groups its “power brands” like Ibis and Novotel together with other more “industrialised” brands such as Movenpick and Pullman; the other that encompasses luxury and lifestyle bringing together the brands under Ennismore with Raffles, Fairmont and Sofitel. This new structure is formally activated in the New Year.

As we wrote when this structure was announced last July, there remains the risk that the new look highlights a perceived conglomerate discount. The luxury and lifestyle operation looks ripe to be taken private by Qatari investors, perhaps giving Jin Jiang, Accor’s single biggest shareholder with a holding of 12.9% at the end of June, an opportunity to exit.

Beyond Accor, the bigger question remains how long hotel company performance can remain decoupled from current economic trajectories. Tailwinds, particularly travel recovery momentum, still seems stronger than recessionary headwinds.

My view is that as long as this recession does not create widespread unemployment, hotel demand should remain strong. While consumer spending power is suffering, there is evidence that other consumer spending segments are being cut back to maintain travel spend.

But there are limits to this, particularly if the recession proves longer than anticipated. And there are also other potential problems ahead for some of the global majors. In my view, the problems in China are under appreciated and if growth stalls in the PRC this will seriously dent many NUG projections.

Overall, the situation looks remarkably positive given the dark clouds elsewhere in the economy, particularly in growth sectors such as technology.

For the hotel sector to thrive, it is not just absolute performance that matters but relative.

The weight of money that investors still have to spend means that it is not if but where to deploy. There is short-term hiatus while debt markets stabilise but by Q2 next year deals look ready to start in earnest once again.

Hotel brands will have relatively easy comparables in Q1 thanks to lingering impact of the Omicron outbreak in late 2021. Thereafter, trading will be judged on largely recovered performances. Providing the recession is short-lived, the hotel sector may escape largely unscathed.

Hospitality seeks green leadership

The hospitality industry wants to be a champion in sustainability, according to two initiatives launched in October.

Lobby group the Sustainable Hospitality Alliance (SHA) and trade body UKHospitality both announced plans to raise the industry’s environmental and social action efforts.

The SHA is a 30-year-old body that started life as the International Hotels Environment Initiative, part of the then Prince of Wales’ International Business Leader’s Forum. It has now broken away and is forging a new “covenant”, according to CEO Glenn Mandziuk.

Chairman Wolfgang Neumann, a former CEO of Rezidor, said, “the hospitality industry is a force for good” but warned there was now a need for “much more action and much more urgent action”.

The SHA’s membership, which currently encompasses 35% of the world’s branded hotel stock, faces a challenge with the traditional linear consumption and production model, according to Mandziuk. Too few companies have set science-based targets for sustainability, perhaps less than 1%, warned Mandziuk, even though 28% of the industry has a climate strategy. “We need to rethink what success looks like and confront zero-sum thinking,” he explained. “We must focus not just on the customer but on the community.”

Blackrock CEO Larry Fink was referenced in his view that we must be deliberate about what we are doing to the planet, people and place. “Hospitality needs to be an agent of positive change,” added Mandziuk.

At the conference and gala dinner SHA hosted, and in the following few days, a series of new partnerships were announced, including with the American Hotel & Lodging Association, the United Nations World Tourism Organisation and the World Travel & Tourism Council.

In addition, phase two of the SHA’s Hotel Carbon Measurement Initiative was released. This provides an updated way to calculate carbon output and is supported by the WTTC, AHLA and the Global Business Travel Association.

Alongside the HCMI, there are similar water and waste measurement tools. All three methodologies are used in the Cornell Hotel Sustainability Benchmarking index.

The same week as SHA’s summit, UKHospitality hosted its own rescheduled seminar to launch its Sustainability Commitment. This document set out 10 pledges in four areas – waste, supply chain, skills and biodiversity.

The simultaneous launch of the Environmental

Sustainability Guide for the Hospitality Sector SMEs was revealed in a presentation by Burger King UK CFO Tim Doubleday. “You need a resilient business and this means taking account of ESG,” said Doubleday at the seminar. He also noted that focusing on simple actions can reduce energy consumption by 30%.

Ha Perspective

By Andrew Sangster: There are profound challenges as a journalist when covering the green agenda, particularly if your focus is on numbers rather than emotions. Right now there are no standardised measures of carbon and therefore no agreed way of ranking the performance of companies in their efforts to be sustainable.

At the UKHospitality seminar, Sky’s Stephanie Landymore said that carbon measurement is today where accountancy standards were 50 years ago. It was an intelligent answer to my questioning of why there were so many different ways of measuring carbon. But accountancy has never generated the level of emotion that the green agenda does.

Attending any sustainability themed event is like being at a religious service. Almost everyone there is a true believer and questioning anything makes you feel like you’re farting in a lift.

For progress in actually doing something, there must be more focus on the trade-offs, and these must be informed with meaningful numbers. You do not have to be fully subscribed to Milton Friedman’s notion that “the social responsibility of business is to increase its profits” to worry that imprecations to “do more now” without proper cost-benefit analysis will likely not end well.

There is active and meaningful pushback to the concept of net zero. It reminds me of where the Brexit debate was a decade or so before the UK voted to leave. We know how well that went. The Brexit vote was lost, in part, because there was a failure to engage with the sceptics and to do the heavy lifting of persuasion with facts and data. Having a single, agreed way to measure carbon is the first essential step to engaging in discussion about trade-offs.

Back in 2006, Hotel Analyst extensively covered the launch of Nicholas Stern’s The Economics of Climate Change. For me, the key message was not around evangelising the green cause but framing it as a debate about probabilities and the need to see action as an insurance policy. We need far less proselytising and far more rational discussion of how much we need to be investing as an insurance policy. There are challenging and awkward conversations ahead about who will bear the cost.

At the SHA Summit, it was pointed out that the hospitality industry will need to be able to defend itself against regulators. Knowing exactly what our industry contributes to carbon output is a good start. Reducing the number of ways we are currently measuring carbon down from the current couple of dozen plus methodologies will take us another step towards being able to make a credible defence.

For the true believers, I urge you to tone down the rhetoric and use more grown-ups like Wolfgang Neumann. If we cannot even agree on how carbon should be measured, then it is certain the debate will be lost and with it any chance of implementing the steps needed to tackle climate change.

Staff shortage forces creativity

A post-pandemic shortage of staff continues to hinder the ability of hospitality businesses to meet the demand from consumers, for service with a smile.

The shortfall has led to some hotels cutting seasonal capacity and events offerings, as they strive to do as much as possible with less on the team. And a broader range of initiatives are now coming forward to help drive more skilled staff into hospitality. In the UK, an industry-wide initiative is seeking, through private funding, to build a campaign that will reposition the sector’s reputation among those looking for work or a career opportunity.

The shortage is an international issue - and some governments have already committed to action. In July, the German government said it would ease ways in which companies could recruit workers from source markets such as Turkey. Faster residency and work permits were promised, initially to help airports as they struggled to scale up for returning travellers.

The French government, too, has looked at ways to get people back into work, not least in hospitality. In the summer, the country recorded a 7.5% unemployment rate, something President Macron is keen to get down to 5%, with one option being to make it tougher to access unemployment benefits.

Spain, too, has struggled, and started the busy summer season short of 200,000 staff. Riu Hotels has launched a pilot hotel school at one of its properties in Playa de Palma. For five months, starting in November 2022, the hotel will run courses with Riu committing to hire 60% of the school’s graduates. The initiative is being supported financially by the SOIB, the employment service for the Balearic islands. Other hotel groups including Viva, THB and Iberostar have said they will wait for the outcome of the pilot, but are interested in similar initiatives.

The problem is also evident in the US, where a shortage of staff is hampering restaurants and driving hotel operators to get imaginative.

In the UK, it is reckoned there is a 10% vacancy across hospitality as a whole, effectively meaning a shortfall of 200,000 workers.

“Only two-in-five people working in hospitality would recommend it as a career - we need to increase that,” said Kate Nicholls, CEO of UKHospitality. Currently just 20% of young people look to the sector as a career path when leaving education, and the aim is to double that number. “The challenges we face are so severe, it really needs a big, all-industry call to action to address them.”

An industry-wide marketing initiative, Hospitality Rising, is gathering momentum across the UK and at the end of October 2022 launched a cross platform, sector-wide advertising campaign to get the attention of potential employees.

Hospitality Rising was created in 2021 by Mark McCulloch, CEO of consultancy Supersonic, who explained the initiative: “Hospitality Rising is a call to arms for the sector. It is an opportunity to unite and face the challenge collectively, rather than going it alone as has been the way in the past. Inspired by the other industry campaigns, most notably the famous ‘Be The Best’ initiative by The British Army, we want to shine a fresh light on hospitality that will inspire a new generation of people to consider jobs and careers in a sector that we know can be both rewarding and fun.”

The movement has already gathered GBP850,000 on its way to an initial GBP1m target, with a range of supporters including many pub and restaurant groups, as well as hotel operators like Hilton.

The changing environment has also led to a situation where hotel companies now announce pay rises not as an increase in overheads, but an investment in their people. Whitbread recently touted a GBP15m spend on pay rises and bonuses as an “investment in team member pay”. In December 2022, staff received their second pay rise of the year, along with a one-off cost of living bonus payment for many.

“We’re hot off the heels of another very busy summer, where our hotel and restaurant teams have continued to deliver the outstanding guest service for which they are famous,” said Simon Ewins, Managing Director of UK hotels and restaurants for Whitbread. “We want to thank our guest-facing team members for their continued support.”

And owner-operator L+R Hotels recently announced a GBP500 per person bonus for staff at its Strand Palace Hotel. Other improvements promised include an upgrade to back of house staff restaurant areas, and a wellbeing zone for team members.

It is also pushing other hotel groups to invest directly in growing talent. UK third party operator Bespoke Hotels launched a management training programme in late 2022, with a two-year course aimed at developing stars of the future. “Our trainee management programme has been created to inspire future development of our team and is an exciting opportunity for successful trainee managers to take the next step on their career pathway,” said CEO Thomas Greenall. “The programme is open both internally and externally and every programme is tailor-made to suit the individual’s development needs. We take a maximum intake of only five candidates a year, so it really is an exclusive chance for potential leaders of the future to develop and grow while learning on the job.”

There is also growing interest in ways to hire staff on a more flexible basis. Qwick, an ondemand staffing app for restaurants, has just raised USD40m in a series B funding round, to help it scale up. The business expanded this year from 13 to 23 markets. It is not alone. Other platforms such as Hotel Effectiveness and Busy are also in the space, while in the US, third party hotel operator Aimbridge recently told Hotel Analyst it is trialling this Uber-style way of hiring staff in some larger city markets.

Ha Perspective

By Andrew Sangster: It is almost beyond parody how many times I have heard hospitality industry executives wail about why so few people choose hospitality as a career and seem to stick their fingers in their ears as everyone else explains that it is directly related to low pay, unsociable hours and little career progression.

Maybe, then, employers could help fix the problem by increasing pay and offering better working conditions. But of course, that can only be done if businesses remain profitable and individual businesses are not compromised against their rivals.

Pay is certainly going up. Growth in total pay across all sectors went up 6.0% for the three months July to September 2022, year-on-year, according to the UK’s Office for National Statistics. There was the strongest growth in regular pay ever seen outside of the pandemic period when the data was a little wobbly. And leading the way is the wholesaling, retailing, hotels and restaurants sector with a bumper growth rate of 7.3%, beating the next placed finance and business services sector at 6.2%.

Thanks to inflation, however, real terms pay is dropping, down 2.7% for regular pay in the period across all sectors. But inflation can be a friend when it comes to resetting. If hospitality employers want to improve the status of the sector now is the time. Push up prices, push up wages and improve productivity.

Easier said than done but it is what will distinguish the better operators over the coming years.

In the meantime, the hospitality star is beginning to rise. Despite the much touted negatives, there are huge positives about working in the industry, which marketing campaigns like Hospitality Rising do a good job of highlighting.

The sociable, groovy aspects of hospitality are too often ignored. This is a changing world where skills like empathy, sociability and craft are being re-evaluated and, albeit slowly, better rewarded.

Much routine knowledge work, which is overcompensated, I would argue, relative to the hand and heart – terms expressed by British journalist David Goodhart – can be replaced by artificial intelligence. Those at the top of “head” or knowledge-based professions will continue to enjoy outsized rewards but the base of the pyramid is narrowing.

Hospitality is an industry of the future for the economy, both in terms of economic growth prospects and employment. Goodhart’s book, ‘Head, Hand, Heart’, is subtitled: ‘The struggle for dignity and status in the 21st Century’. Hospitality is at the frontline of this battle.

Hotel Analyst is the news analysis service for those involved with financing hotel property or hotel operating companies.

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