Where Hotel Growth Happens Next

Glenn: [00:00:01] Hey everybody. Thank you so much for tuning in to another episode of No Vacancy. I’m Glen Housman and I am back here to help you understand what is going on in the global pipeline. Well, not me, I got a I got someone that we all know and love to help us with that. But first, I want to thank our friends over at Actabl. Actabl. They give you the power to profit. Do me a favor, check them out at actabl.com. No E in Actabl, but Actabl right now. And do that. All right, let’s go to it. Chris, for Senior Vice President, lodging, econometrics. What’s going on in the world, buddy?

Bruce: [00:00:33] Hey the world is one wild and crazy conundrum right now, and you could tell a different story everywhere, but you’re here today to kind of add some of them up.

Glenn: [00:00:46] Yeah, for sure. And we’re talking, of course not about what you’re thinking. We’re talking about the hotel construction pipeline out there. Crazy kind of industry. Kind of hard, though, Bruce, to take the whole globe and try to break it down to one thing that makes sense. So let’s let’s go for it.

Bruce: [00:01:00] Well, every single hotel company out there is talking. Is going to be talking about where they can grow. Okay. And the growth right now does center around Asia Pacific. We did a cast on that a week ago or so. Yep. But much of what we’re seeing today is also controlled by growth through conversion or growth through new construction.

Glenn: [00:01:25] That is right. But mostly I’m seeing out there right now, the conversion is where it’s where it’s at. And new construction, although still strong, all the conversation seems to be around the conversion side of the business.

Bruce: [00:01:38] That’s because we have a mature supply landscape here in America where there is growth. Now in Asia Pacific, we’re talking about where there is very limited Western brand supply, which is why we see such aggressive conversation about growing in India, because the Western brands are largely underrepresented there. Yes.

Glenn: [00:01:59] And be sure to check out our India show. Bruce. I’ll put links for both the India show and the the China stuff below as well.

Bruce: [00:02:07] Yeah, both of those would be really good to talk about. So in Asia also Southeast Asia pipeline continues to grow. But Asia as a whole pipeline is likely to start to decline as China’s openings continue. Right.

Glenn: [00:02:20] So what is that. So you’re saying as China’s openings continue they’re not building more hotels. Why?

Bruce: [00:02:27] They are building more hotels, but they’re not building them in the first five cities. They’re not 1000 rooms. They’re going to be a little bit more of the fill in conversation now with a lot of upper midscale, mid-scale and upscale, which are just simply smaller hotels.

Glenn: [00:02:44] So following up on our previous conversations, is it fair to say that when it comes to the hotel construction pipeline, India is going to be the new China?

Bruce: [00:02:53] It will be, but it probably will never have as many projects as China or as large of hotels as China. It is anticipated, though, that it will become the top story as we go forward because it will be a full blown western rising of much of the hotel supply in India.

Glenn: [00:03:13] Interesting. So I’m curious as to how you see how this the global pipeline is set up. Let’s do it by category first. Bruce. Luxury man, an upper upscale. Whoa. Still pretty serious.

Bruce: [00:03:27] Very big chain scales in terms of new supply growth. And this is indicative of what is finishing in the pipeline right now. As you can see, the total pipeline for those, it’s very driven by those that are under construction. So a lot of that is China. Some of that is America, some of that is Mexico. Some of that is larger projects in the Middle East as well. That’s when you build the first layer of Western hotel supply. You do it with full service hotels. Then you step down and put a second layer in of upscale and upper mid scale while building up from the bottom, also with economy and mid scale. Yeah. So much of what we anticipate for under construction at 1 million guestrooms or so, about 460,000 of those are in China. Okay. So we’re not just not starting enough hotels and other places around the world for new construction for this to continue at this level. Yeah. So it is anticipated we will go under a million guest rooms under construction sometime in the next 2 to 3 quarters.

Glenn: [00:04:37] That makes a whole lot of sense. Bruce, I got a question for you. We don’t talk about Africa enough. And I know you said you sent over some numbers about 52000 keys coming through Africa. What’s going on there? How much of it is just that the world is just chooses to ignore Africa versus what’s actually going on in Africa.

Bruce: [00:04:57] Well, I think you would probably recognize that the expansion of outdoor brands was some of the hotel companies is going to have an impact there.

Glenn: [00:05:06] That’s right.

Bruce: [00:05:07] You’re also seeing some of the major cities begin to get a little bit more westernized with their brands. Azerbaijan, Baku has some of the nicest luxury hotels, certainly that you will find. But the southern tip of Africa is really where it is. And there’s also a good pipeline in Egypt as well.

Glenn: [00:05:26] Yeah. But do we consider Egypt Africa or is it put into the Middle East numbers?

Bruce: [00:05:31] Africa.

Glenn: [00:05:32] Okay. That’s that’s cool. Because a lot of that’s one of the confusing things. Northern African countries, maybe not Tunisia, but the others seem to get lumped in with the Middle East as well, you know.

Bruce: [00:05:43] Well, they they do border it, if you will. And of course, you can group those things together in different ways. And many of my customers do in terms of how they sell and approach the marketplace and where the investors want to go. Typically when they, when they’re looking to develop their.

Glenn: [00:06:00] What other observations do we see here on this global construction pipeline list by category?

Bruce: [00:06:04] So we have the renovation and conversion numbers. And again, that’s a combination. You’re either one or the other. If you are doing a brand conversion you’re also likely doing a renovation, but we’ll call it a conversion, right? So in many cases, this is growing trend around the world. It is very active in the United States. It is growing throughout Europe. There is a contingent in the Middle East as well. And we may see it begin in China for the next real estate cycle, as that comes about in 29 and 30. Also for renovations, there are has been a little bit of a growth in that in the Middle East as a result of some hotels just choosing to take inventory offline and put it under renovation because of economic conditions down there.

Glenn: [00:06:51] Yeah. Caused by military stuff. Yeah.

Bruce: [00:06:55] All right. So the total construction pipeline is about 10% of where the peak was. We got over 2.6 before. I don’t think we’re going there this time. Even with the aggressive kind of expansion of signings in some places, it’s just going to be more affected by openings that will occur, particularly in Asia.

Glenn: [00:07:18] Let’s take. Are you ready to take a look at some of the markets?

Bruce: [00:07:21] Well, to the far right here is a new forecast for us. So we have the 2027 forecast that we have had in place for quite a while. It’s just under 400 000 keys around the world. And that’s the first time we’ve premiered the 2028 forecast at about 360 000 new guest rooms, but we will renovate and convert more than 700,000 guest rooms across the world annually over the next couple of years.

Glenn: [00:07:48] Bruce, give us give us a minute on the yin yang that we see between new construction and conversion, renovation periods of time, because I think this is like the third time in our career we’re going through this.

Bruce: [00:07:59] Yeah. In America right now, it’s about 3 to 3.5 times more renovation and conversion. In other places, it’s more like a 50/50. That would be kind of Asia, Northern Asia, China, Southeast Asia, lots of renovations and conversions active there in Europe has begun to get active as well, but there it’s probably more like a 1.75 to 2 times more renovations and conversions. So when you look in marketplaces, you shouldn’t be just looking at new construction and say, well, new supply is low. Okay. Right. Well, actually the supply is very much changing. When we started in the industry, Glenn, many of the hotel companies had, you know, a couple of brands. Right now you have companies that have 25 and 30 and 35 brands. That’s going to drive a great layer of development in any place.

Glenn: [00:08:52] The good news is they have well defined slim lane swim lanes and consumers aren’t confused at all. So it’s pretty, pretty amazing. We’ve pulled this.

Bruce: [00:09:00] Off. The level of consumers that you’re talking about. Glenn is also very different. We have many more generations of travelers below us now that are younger than us than when we started in the industry. And I’ve told you many times, new brands are not for you, Glenn. They’re not for me either. They don’t build brands for 50 plus year old men.

Glenn: [00:09:21] Well, except maybe some of these luxury brands might be appealing to.

Bruce: [00:09:25] Well, we’re just stepping into those, if you will. We. They’ve always been there. Okay.

Glenn: [00:09:30] That’s a good.

Bruce: [00:09:30] Point. We’re just stepping into those. And there’s sure some collection brands, but those are designed more boutique for people that are younger than us. That’s right. Who are looking for that full service experience with a little bit more style.

Glenn: [00:09:43] Yeah. Well, Bruce, I hate to break it to you. I’m starting a new hotel brand squarely focused on the AARP community.

Bruce: [00:09:50] So the hotel brand.

Glenn: [00:09:52] Yeah. That’s that that’s that’s right. Ribs, ribs and walkers for everybody. So we we got Bruce Dallas is the number two market for global hotel construction. What? Yeah.

Bruce: [00:10:07] Well, Dallas has really got a lot of new international businesses that are taking headquarters in Dallas. The population is growing there. They’ve paid a lot of concessions for corporations to move there.

Glenn: [00:10:19] And the and let me just jump in, Bruce. You’ve been talking about this trend for at least three, 4 or 5 years now. Of that whole Dallas region corridor in the south southwest becoming huge.

Bruce: [00:10:32] Also, Dallas has a lot of exits that are going through a major redevelopment on some of their biggest highways inside of the metro area. So where you have a hotel that was built in 1975 that needed seven acres, now you can put three hotels there. So the change in that building is just going to get bulldozed. And they’re going to put three hotels up or two hotels in a restaurant or something to that effect. So we’re seeing a lot of that too. And, and we’ve used the phrase and we’ll continue to hear this. I’m not overbuilt. I’m under demolished.

Glenn: [00:11:07] Yeah, I’ve been hearing that thing for 25 years. Probably. Right.

Bruce: [00:11:11] You’re dating yourself, Glenn.

Glenn: [00:11:14] I think the I think time is dating myself. Bruce. There’s two here from Saudi Arabia. What are your observations there?

Bruce: [00:11:22] So we have, as I mentioned, some inventory that’s closing in some of those places to be able to renovate because demand is soft. It is anticipated that some of these construction projects have slowed down, but ultimately those openings have spread out 6 to 12 months in some cases. And if you’re seeking any of that detail, certainly the individual line items are being maintained by our research team.

Glenn: [00:11:49] What’s the big picture? What’s the takeaway?

Bruce: [00:11:52] The big picture is growth is the story. If you’re reading any of the public hotel companies, they all have to find growth. It will be conversions in many markets. It will be new construction in Southeast Asia. It will be new construction in the Middle East. And we’ll continue to follow it. Glenn. And we’ll continue to bring these podcasts to the masses.

Glenn: [00:12:13] Yes. Well, I’m hoping we won’t have to go too long because this might be the is this the last one of your Q two?

Bruce: [00:12:20] Oh, no. We’ll have another special one, Glenn. And of course we’ll have to have a preview of the lodging conference.

Glenn: [00:12:26] Oh yeah. Alright, good. So tune in for all of that check below. We got links galore on India and whatever else I promised earlier that Bruce will remind me of that. I got to put in the links, but they’re there. At least I hope they are.

Bruce: [00:12:41] Everybody have a great end to the summer.

Glenn: [00:12:43] No, no.

Bruce: [00:12:45] Back to school. On LinkedIn, lodging, econometrics. You can find me on LinkedIn as well, Facebook and Instagram. And of course, I’m happy to talk to anybody that wants to get their strategy updated for 2027 in terms of how to approach any market across the world.

Glenn: [00:13:02] A beautiful and I think that’s been absolutely great talking to you once again today. And I want to thank all of you for being here today. Please be sure to like, share, subscribe, all of that kind of good stuff. And remember, you guys, you got one life. So blaze on and Bruce, say something great to take us out.

Bruce: [00:13:18] I’ll miss you, Glenn. It’s the end of the summer. See you in a month, buddy.

Glenn: [00:13:23] All right. See ya. See you in Phoenix. See everybody later. Right back here for another episode of No Vacancy. Bye, everybody.