Recovering Economy Breathes New Life Into Hospitality Projects
April 26, 2002
U.S. Purchasing Firms Ready Themselves For Challenging Renovation World of 2002
USA - Consultant groups say there is a tough year ahead, but all indicators point to recovery for the hospitality industry. A recent study by Price Waterhouse Coopers concluded that the recession (and not fears related to Sept. 11) was 83 percent of the reason for decreased lodging demand in the fourth quarter of 2001. With the recent upturn in the economy, the hospitality industry, predictably is showing signs of life. Importantly, there is consensus among hospitality purchasers that projects that have been frozen since last quarter are beginning to move forward. At last.
''We felt the nervous atmosphere of the fourth quarter of 2001,'' said Martin Stringfellow, principal of Martin B. Stringfellow purchasing company, which has offices in Orlando, Fla., and Boulder, Colo. ''However, we have started more new projects and had more inquiries in the first six weeks of this year than in the last six months of last year. If the full recovery hasn''t begun, I feel everyone will be in good shape by the third quarter of 2002.''
Few purchasing firms report scads of projects, but they agree that discussions - an important indicator in the industry - are picking up and orders are beginning to trickle in.
''We''re seeing more activity,'' said Bonnie Mitchell, partner at Purchasing Partners Inc., based in Atlanta, Ga. The small design and purchasing firm has work in the mid-market segment in Atlanta, Orlando, Fla., Charleston, S.C., Erie, Pa., and in Louisiana.
''The financing that is available is still in the mid-price market segment vs. the high end segment,'' she said.
U.S. Federal Reserve Chairman Alan Greenspan''s announcement of the end of the recession before the Senate Committee in mid-March was not a surprise. Many in the industry had been predicting a turnaround since last quarter. However the upturn won''t be an instant resumption of the construction boom of recent years, and consultant groups forecast a slow recovery for the industry.
Smith Travel Research, an independent research firm based in Henderson, Tenn., projects more new room constructions in 2002 than last year. However, consultants say this is the result of inertia from the banner years of 2000 and 2001.
''Many projects are still in the pipeline for 2002, as a great deal had already received financial backing and had broken ground prior to the recession and events of September 11,'' said Regina DiBenedetto, senior consultant, Ernst & Young Hospitality Services Group.
Ernst & Young''s Hospitality Services group national director Chase Burritt said 2002 will be ''the toughest year in recent memory.'' Burritt, the author of the 2002 National Lodging Forecast sees the industry begin to recover in 2003 and fewer new projects in the meantime.
''Today, there are fewer rooms under construction than at any other time during the past three years,'' he said. ''That slowing in supply should actually stabilize occupancy rates and help the recovery process begin to take hold in 2002.''
Renovation projects, many of which were tabled after Sept. 11, are the order of the day. ''I was just at a Dallas conference and they announced that there will be only 39,000 new hotel rooms,'' said Neil Locke, principal of the Itasca, Ill.-based hospitality procurement service of the same name. ''People are going to start putting money into their assets and the people that have the liquidity will recognize that. With the downturn in occupancy it''s a good time to renovate hotels because they''re renovating unoccupied rooms. That''s what I''m seeing.''
''We''re seeing more renovation and capital work,'' said Mitchell. ''I think with the market as it is, and occupancy hard to come by, people are going to have to keep their product up. There''s been a lot of new construction the last five or seven years.''
In the meantime, the industry remains cautiously hopeful for a broader convalescence. ''As far as new projects going forward,'' Locke said, ''it''s a macroeconomics question. It''s going to be a function of the overall economy coupled with hotel economy. Then you have to start looking at the various segments. New economy projects will probably begin to occur more in the near term whereas luxury projects will probably be farther out.'' Stringfellow, who praised the loyalty of his customers during the lean time, seems calm. ''In the 29 years I have been in the business, this has happened at least four times. If you can remain as solid as possible and maintain a positive attitude, then you will be in line for the first opportunities available as the economy recovers. In a weak economy, people gravitate toward strength and positive thinking.'' F&FI
USA - Consultant groups say there is a tough year ahead, but all indicators point to recovery for the hospitality industry. A recent study by Price Waterhouse Coopers concluded that the recession (and not fears related to Sept. 11) was 83 percent of the reason for decreased lodging demand in the fourth quarter of 2001. With the recent upturn in the economy, the hospitality industry, predictably is showing signs of life. Importantly, there is consensus among hospitality purchasers that projects that have been frozen since last quarter are beginning to move forward. At last.
''We felt the nervous atmosphere of the fourth quarter of 2001,'' said Martin Stringfellow, principal of Martin B. Stringfellow purchasing company, which has offices in Orlando, Fla., and Boulder, Colo. ''However, we have started more new projects and had more inquiries in the first six weeks of this year than in the last six months of last year. If the full recovery hasn''t begun, I feel everyone will be in good shape by the third quarter of 2002.''
Few purchasing firms report scads of projects, but they agree that discussions - an important indicator in the industry - are picking up and orders are beginning to trickle in.
''We''re seeing more activity,'' said Bonnie Mitchell, partner at Purchasing Partners Inc., based in Atlanta, Ga. The small design and purchasing firm has work in the mid-market segment in Atlanta, Orlando, Fla., Charleston, S.C., Erie, Pa., and in Louisiana.
''The financing that is available is still in the mid-price market segment vs. the high end segment,'' she said.
U.S. Federal Reserve Chairman Alan Greenspan''s announcement of the end of the recession before the Senate Committee in mid-March was not a surprise. Many in the industry had been predicting a turnaround since last quarter. However the upturn won''t be an instant resumption of the construction boom of recent years, and consultant groups forecast a slow recovery for the industry.
Smith Travel Research, an independent research firm based in Henderson, Tenn., projects more new room constructions in 2002 than last year. However, consultants say this is the result of inertia from the banner years of 2000 and 2001.
''Many projects are still in the pipeline for 2002, as a great deal had already received financial backing and had broken ground prior to the recession and events of September 11,'' said Regina DiBenedetto, senior consultant, Ernst & Young Hospitality Services Group.
Ernst & Young''s Hospitality Services group national director Chase Burritt said 2002 will be ''the toughest year in recent memory.'' Burritt, the author of the 2002 National Lodging Forecast sees the industry begin to recover in 2003 and fewer new projects in the meantime.
''Today, there are fewer rooms under construction than at any other time during the past three years,'' he said. ''That slowing in supply should actually stabilize occupancy rates and help the recovery process begin to take hold in 2002.''
Renovation projects, many of which were tabled after Sept. 11, are the order of the day. ''I was just at a Dallas conference and they announced that there will be only 39,000 new hotel rooms,'' said Neil Locke, principal of the Itasca, Ill.-based hospitality procurement service of the same name. ''People are going to start putting money into their assets and the people that have the liquidity will recognize that. With the downturn in occupancy it''s a good time to renovate hotels because they''re renovating unoccupied rooms. That''s what I''m seeing.''
''We''re seeing more renovation and capital work,'' said Mitchell. ''I think with the market as it is, and occupancy hard to come by, people are going to have to keep their product up. There''s been a lot of new construction the last five or seven years.''
In the meantime, the industry remains cautiously hopeful for a broader convalescence. ''As far as new projects going forward,'' Locke said, ''it''s a macroeconomics question. It''s going to be a function of the overall economy coupled with hotel economy. Then you have to start looking at the various segments. New economy projects will probably begin to occur more in the near term whereas luxury projects will probably be farther out.'' Stringfellow, who praised the loyalty of his customers during the lean time, seems calm. ''In the 29 years I have been in the business, this has happened at least four times. If you can remain as solid as possible and maintain a positive attitude, then you will be in line for the first opportunities available as the economy recovers. In a weak economy, people gravitate toward strength and positive thinking.'' F&FI
