• Debating development

Unlocking currently stalled hotel development requires greater transparency and more collaboration with debt investors at an earlier stage, agreed attendees at an interactive seminar hosted by EC Harris, King Sturge and Hotel Analyst last week.

Representatives of both debt and equity sources spoke of the need to improve understanding of the sector to break free of the cloud of suspicion that overhangs it.

Given current economic conditions, it might be expected that hotel development had stalled altogether. But, while undoubtedly slowed, it has certainly not stopped.

In London alone, 1,476 rooms opened in the first nine months of this year, according to the London Hotel Development Monitor published by Visit London in partnership with TRI Hospitality Consulting.

A further 587 rooms are due to open this year, meaning that at just over 2,000 rooms, the opening rate has slipped by a third compared to the 3,065 opened in 2008.

Next year, another 1,849 rooms are under construction and due to open. But perhaps surprisingly a further 2,130 rooms are under construction and due to arrive by 2011. Just 203 rooms are officially on hold.

The quarterly study reckons there are another 11,060 rooms in London that are probable and an extra 8,765 that are possible.

Now London is something of a special case due to the 2012 Olympics. Despite every rational consultant advising against building just for an event, it still seems that the event factor can tip marginal projects over the finishing line in terms of funding.

Even so, last week's event was encouraging in hearing that debt providers are still willing to lend to development projects. Perhaps telling though was that when challenged to name a project they had backed in the past couple of years, they struggled.

Maybe the most important point of the night was made by a representative from institutional capital. He said the key was making the sector more transparent with more investment return benchmarks along the lines of those readily available in other commercial property sectors.

Some attempts have been made at this but so far they have failed. More needs to be done.

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