Global hotel construction activity declines in June

Properties under contract declined most in Europe, STR says

April 12, 2010 / Abu Dhabi / (Rich-Joseph Facun / The National) A man grinds metal while working on the future Abu Dhabi Securities Exchange building under  construction on Sowwah Island, photographed Monday, April 12, 2010.  
(Editors note: Al Maryah Island (formerly Sowwah Island) has been classified as an investment zone, setting it at the forefront of Abu Dhabi's real estate opportunities. It is a 114 hectare mixed-use residential, retail, leisure, hotel and commercial development in the heart of Abu Dhabi. It is designated by the emirate's Urban Planning Council to be the capital's Central Business District (CBD). Sowwah Square is the exclusively commercial first phase of Abu Dhabi's new Central Business District (CBD). (Source:
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Hotel construction and planning activity declined globally at the end of the second quarter, according to data from hospitality industry analytics provider STR.

The four regions of Europe, the Americas, Asia Pacific, and the Middle East and Africa recorded a drop in hotel pipeline activity in June, compared with the same month last year, the data showed. STR did not provide an explanation.

The total number of hotel rooms under contract declined most in Europe, by 7.4 per cent, and the least in the Middle East and Africa, at just 0.6 per cent, the London-based company said.

Global capital investment in travel and tourism fell by about a quarter, to $805 billion in 2020, from $1.07 trillion in 2019, as the Covid-19 pandemic devastated the industry, according to data from the World Travel and Tourism Council. Investments in the sector declined a further 6.9 per cent in 2021 to reach $750bn.

Investment in hotels represents a key component of overall investment and the development of the broader travel and tourism sector.

In Europe, the number of rooms under construction declined 12.6 per cent to 207,315 rooms, while those under final planning dropped 15.2 per cent to 150,164 rooms, STR data showed.

Germany and the UK led Europe in terms of total rooms under construction, with 40,729 and 28,612 rooms, respectively.

In the EU, the travel and tourism sector’s recovery could be put at "serious risk" if almost 1.2 million jobs stay unfilled during a labour shortage this summer, the WTTC and European Travel Commission said in a separate report.

Europe's air transport and accommodation segments are not expected to fill about one vacancy in five, representing a 21 per cent and 22 per cent staff shortage respectively, WTTC said.

In the Americas, the total number of hotel rooms under contract declined 5.8 per cent year on year to 739,777 properties in June, STR data showed.

The number of hotel rooms under construction in the region decreased 16.9 per cent to 202,250 rooms during the period. Those under final planning dropped 14.4 per cent to 208,583 rooms.

"The US holds the majority of rooms in construction in the region. After the US, Mexico (14,909) and Canada (7,232) have the highest number of rooms in construction in the region," STR said.

The US hotel industry has been recovering and reported its highest monthly room rates on record in June, STR said in a separate report. The average daily rate climbed 15.3 per cent to $155.04.

The country also reported an all-time high hotel room revenue, a key measure for a hotel’s top-line performance, which rose 10.3 per cent to $108.64. Occupancy was the highest since August 2019, standing at 70.1 per cent.

In Asia Pacific, the total number of hotels rooms under contract fell 1.2 per cent annually to 917,719 in June, STR data showed.

The region's hotel rooms under construction rose 2.1 per cent to 486,412 rooms, while those under final planning contracted 29 per cent to128,808 rooms.

"Among countries in the region, China has the most rooms in construction (308,062), followed by Vietnam (31,161)," STR said.

The Middle East and Africa recorded the softest drop in hotel pipeline activity globally, according to STR.

The region has posted a broad recovery in hotel performance in most markets during the first half of 2022, according to a Mena hotels market report by Colliers.

Hotel rooms under construction in the region slipped 6.2 per cent to 127,397 rooms, while those in final planning dropped 18 per cent to 37,143 rooms, STR data showed.

"Saudi Arabia (37,654) and United Arab Emirates (31,671) lead in construction activity," STR said.

In the UAE, the impact of Expo 2020 hosted in Dubai has had a positive effect on all markets in the country, while the Fifa World Cup to be hosted by Qatar later this year is expected to result in overspill demand to key transit centres, such as Dubai and Abu Dhabi, Colliers said.

In Saudi Arabia, growing consumer confidence has benefited the Riyadh and Jeddah markets, according to the Colliers report. Meanwhile, the return of pilgrim demand has improved the outlook for the Makkah and Madinah markets.

Updated: July 21, 2022, 12:03 PM