1017: Hotel Pipeline Update – Conversions vs New Construction Across the Americas

Glenn: [00:00:00] Hey, everybody, thank you so much for tuning in to No Vacancy. I’m excited because today we’re going to be giving you a little bit of a glimpse of what’s going on in the Americas part of the world when it comes to new hotel construction, conversions and all of that kind of stuff. But first, I want to thank our friends over at Actabl. Actabl gives you the power to profit. Hey, please check them out at actabl.com or support me. Give them a give them a little bit of a look see over there so we can all pay our bills. Speaking about paying our bills, I don’t know what I’ve done to have to pay back this bill. Bruce Ford SVP, lodging, Econometrics. Hey buddy, it’s great to see you again.

Bruce: [00:00:33] Well, didn’t I pay for your renewal on GoDaddy.com for Glenn com? Right. Is that how you do it now? I don’t even know.

Glenn: [00:00:43] I don’t know, I’ve been I’ve been going by. Gee, but I can’t just secure the single, the single letter over there. So, Bruce, I mean, yeah, I’m excited to talk to you about what’s going on as you see it in the Americas. Pipeline over there. And what is your first big observation? Let’s bring this up. We got a little Canada action going on in the House o Canada.

Bruce: [00:01:08] So we got a few requests to make sure that we talk about Canada. Glenn. So yes, this is the new construction pipeline by chain scale. Okay. So chain scales are the same in the United States that they are in Canada. The first column is listing number of hotels that are being built new that are currently under construction. Total 70 about 9300 rooms. And then the total number of hotel rooms that are being renovated and or the brand is changing and being converted in Canada is two x over the new construction, almost two x. Wow, wow. So this trend is following the United States?

Glenn: [00:01:51] Yeah, it certainly is. And as as we’ve talked about in previous shows that we are really at that part at that point right now where conversions are really rolling. And one of the cyclical things I love about our business, Bruce is how one can eat when one sector is down, other sectors are up. So people that are on the vendor side of the community always have some sort of opportunity, just more of a strategic change. And we’re seeing that right now with two times the conversions in Canada.

Bruce: [00:02:18] Yes, very active market for renovations and conversions in many cases. The US companies that might have had master franchise agreements or buying some of those back in Canada to operate them from the United States. But suffice it to say, the upper mid scale has plenty of bandwidth to expand in Canada, as does the upscale chain scale. Plenty of bandwidth to expand in Canada. And you can expect that those two chain scales will take on similar aspects as they have in the United States, which is they control roughly 50 to 55% of the rooms in the pipeline.

Glenn: [00:03:00] Now, Bruce, conventional wisdom has always been luxury hotels. You can’t have as many. But it seems as we’ve talked about numerous times with the hospitality industry, seems to be really in that top upper end of the industry. So it’s got me wondering, is there more room because of the way the economy has kind of shifted and the way spending has shifted, that maybe there’s more opportunity for luxury hotels beyond what we see right now in Canada, for example.

Bruce: [00:03:25] I think there’s going to be more cities that will be open to having a luxury hotel. And when I say open, it’s not somebody sitting in the mighty chair saying, here’s what we’re doing, right. It’s more of a rate elasticity question. Yeah. Okay. So in the luxury space many of those brands will do 60, 80, 100 unit hotels now where they would never do that before. Right. So the smaller platform can bring some of those luxury products to some of those smaller cities. You know, four seasons as an example, when they first started coming to the United States and really expanding, you know, four seasons would tell you there’s 20 cities that we want to be in in the US. Right, right. And now, now it’s like.

Glenn: [00:04:18] What.

Bruce: [00:04:18] Happens.

Glenn: [00:04:18] Once you get to those 20 cities, right? Yeah, exactly. Because by nature, you have to continue to grow and and and evolve. So Latin America, what’s going on in, in Latin America?

Bruce: [00:04:30] So the challenge here in Latin America is, is there is some political unrest in some countries. There’s obviously some economic crisis in a few other countries. So some of the region has really kind of regressed, if you will, and not really as active as they once were. What we have found, though, is that in Mexico, they continue to go and go very quickly with the new construction and many of the tourist areas, because Mexico was open during the pandemic and did very well. So therefore they’re spending some of those dollars. But also franchise companies are looking for locations there, as Cancun, as an example, has typically been a pretty unbranded marketplace that’s now kind of morphing into a more branded experience down there.

Glenn: [00:05:22] And I guess that makes sense, Bruce, because as consumers get more connected with brands and the major companies really double down on that it makes sense that both of those sides are coming together in a place like Cancun to bring more immediately recognizable options to consumers, to light.

Bruce: [00:05:41] And with those soft brands, Glenn, in many cases, you can keep the character of your hotel local, but be able to plug into those international opportunities through those preferred networks.

Glenn: [00:05:53] Yeah, and I would argue in a place like Cancun, you really want to have that local local feel. Otherwise you’re really missing out on an opportunity, particularly when it centers around pricing. So you were talking about other areas any other countries that are notable because obviously if there’s uncertainty, there’s definitely pockets of certainty. Places as well.

Bruce: [00:06:11] So some of the Caribbean islands continue to have resorts that are in redevelopment. Some of that is weather related. Some of that is taking advantage of the fact that the market was a little bit soft for a while, and really kind of redeveloping your hotel for the next 20 or 25 years. So there’s still a significant amount of resort development in the Caribbean that is that is active.

Glenn: [00:06:37] Yeah. Anecdotally speaking, Bruce I feel like and hopefully, you know, this, I feel like there’s a lot more all inclusive stuff that’s coming with the brands. And I think that that’s helping push conversions and new builds. But I don’t have any. I just feel like that’s a fact. But I don’t know if it’s true.

Bruce: [00:06:58] No, you’re not wrong. But it’s it’s not going to be it’s never going to be a pipeline of 40 things at once.

Glenn: [00:07:05] No no no.

Bruce: [00:07:06] No a few a year.

Glenn: [00:07:08] It’s a it’s a notable uptick from the zero projects I saw before the pandemic. Yeah. Yeah. Also, like I’m seeing a lot of people that we know become appointed Latin America, Caribbean people to So I know if the management companies are putting people in charge as well, then it’s something to be seriously considered in a different light.

Bruce: [00:07:29] Well, the change in the US really, over the last 15 years to the majority of the hotels that are built, are either owned or operated or managed by a third party. That’s not the brand. And as that spreads across the rest of the world, it is a lot of upside potential for management companies that are third party that have experience in that marketplace. So it happened in Europe prior to the pandemic, and now it’s happening in Latin America.

Glenn: [00:08:02] Right. So looking at looking at this one.

Bruce: [00:08:05] So the US again, we released this a couple of weeks ago. But the US is seeing again about two weeks on rooms that are renovating and converting versus ones that are physically under construction. And this is a new and updated forecast for new hotel openings for 2026 and 2027. We’re continuing to bounce off the bottom from hotel openings, but we still need another catalyst, Glen, and that’s another rate drop or two down a half point. And I’ll tell you when new construction will kick back up. In terms of other projects getting physically in the ground, we’ve seen announcements and we have a pipeline total of 720,000 rooms, largely because we’ve had so many new brands come into the marketplace over the past 6 or 7 years. Yeah. So those new brands are ravenous to expand whether they’re in Midscale or they’re in luxury.

Glenn: [00:09:02] And but, Bruce, they might be in those categories, but what cities, what cities would they be in?

Bruce: [00:09:08] Well, we can.

Glenn: [00:09:09] Go to

Bruce: [00:09:10] In terms of talking about cities in the United States that are seeing a lot of development, you could. These are all World Cup cities, Glenn.

Glenn: [00:09:19] Interesting.

Bruce: [00:09:21] Except for Nashville in Austin. That’s that’s wrong. But the top three are. Look at the activity in Dallas. 34 hotels under construction, 28 renovations and conversions that are active today. That doesn’t even account for Fort Worth. Atlanta still building around the Georgia World Congress Center, still building more hotels. Suburbia keeps growing. Lots of reasons to be building in Atlanta.

Glenn: [00:09:47] And what I really like is there’s reason to be building Atlanta, Dallas and Phoenix that are beyond the World Cup that you mentioned. Because you know what bothers me? When they build it for one demand driver that lasts like two weeks or a month, you know.

Bruce: [00:09:59] Well, it’s Glenn, you remember when we had a conference in Phoenix and they moved out to the, to the big J.W. on Desert Ridge, and we went out there and we’re like, there’s nothing here.

Glenn: [00:10:12] Yeah, there was nothing there. That is no longer true. That’s right.

Bruce: [00:10:17] So what’s opening around that hotel now? A couple new hotels this year. Okay.

Glenn: [00:10:24] They’ve got.

Bruce: [00:10:25] They got the office, they got the medical, they got the housing and they got the big resorts. In addition to now we’re going to get some select service to support some of that infrastructure.

Glenn: [00:10:37] Yeah. All right. Before we wrap up, what else do you want to talk about, Bruce?

Bruce: [00:10:40] I want to talk about where I’m going to see you next, Glenn. Because at the end of the day that’s all I really care about.

Glenn: [00:10:47] Well. That’s great. Well, I will hopefully see you at the Hunter hotel investment conference in March. If not, I’m sure I will see you at HD in choice at the beginning of May. At those two concurrent go there. I think they’re running at the same time in Las Vegas. So, so good.

Bruce: [00:11:05] I’d speak to everybody that’s listening to this, whether live or on record. We’re interested in your ideas of what you’d like to hear about. From new construction, renovation, and a real estate perspective, we usually do a special podcast each quarter. That’s a topic that the readers or the listeners want to hear us. At the end of the day, we intend to do Europe and AP and global coming soon. But we also want to do some special ones. We did the FIFA World Cup last quarter. We did extended stay the quarter before. So we’re looking for what you would like to hear about. You want us to take a deep dive on a few cities on the West Coast, the East coast any of that’s open. So love.

Glenn: [00:11:49] It.

Bruce: [00:11:50] Please send in the comments.

Glenn: [00:11:52] And also check out Lodging econometrics.com. Right Bruce.

Bruce: [00:11:55] You bet. Slash global insights Glenn get it right.

Glenn: [00:12:02] All right everybody now that I’ll get something right. Hey like share subscribe this video, follow us on LinkedIn. All that kind of good stuff. All right, everyone, we’ll see you next time. Happy day of the week. Whatever day it is, you’re watching this. Bye, everybody.