The pandemic not only had an outsize impact on hotel operations, it also affected the global development pipeline. The number of under construction rooms that were delayed increased by more than a third between 2019 and 2020. In all, 37,000 hotel rooms that were supposed to open in 2019 had their open dates pushed to 2020 or beyond.
The number of rooms with a 2020 open date that did not open last year was around 51,000 rooms.
Delays are a part of the development process but the increase in 2020 can be attributed in part to new work rules put in place at the local level. In some U.S. states, governors enacted a full construction stop, whereas in other locations construction was allowed to continue but social-distancing measures meant fewer workers were allowed on job sites. The result in both cases were construction delays.
The increase in delays had a direct impact on the number of rooms that were completed, which dropped by just under 10% in 2020 from 2019. The number of rooms that were abandoned outright increased year over year by 800 rooms, but the number of deferred rooms decreased by 500 rooms.
It is not unreasonable to assume that developers, who may had been hopeful of travel turnaround and had deferred their project, ultimately just called it quits and abandoned the projects fully when that failed to materialize.
The total number of abandoned rooms may seem low but the projects examined here all had rapidly approaching open dates so they were already in construction. Very rarely do projects in that phase not reach completion.
Since the hotel industry and its development and capital flows are global, it is also worth looking at completion rates by world region.
What initially stands out when looking at the data by global regions from 2019 and 2020 is the share of completed rooms that decreased worldwide, nowhere more so than in Europe, where the share dropped sharply from just over 60% to just over 40%.
In the Asia/Pacific region the drop in completed room share was less pronounced, but the end percentage was similarly in the low-40% range. The Middle East/Africa region showed the smallest share of room completions in 2019 with a ratio that fell even further to just 28% in 2020.
The increases in delays are likely all related to the pandemic. Construction workers may have been sick or not allowed on job sites. Owners and developers trying to preserve cash likely put projects on hold to shore up finances for their other, already existing projects. Lenders may have asked for more financial assurances mid-project. Whatever the reasons, the cumulative outcome was more rooms getting delayed.
It will be interesting to examine the ongoing development pipeline and revisit the share of rooms completed in early 2022 to see if the high number of delays continues or is behind us.
London-based R&D and Analysis Director Natalie Weisz of STR contributed to this article.