Europe and the Middle East hotel construction is at an all-time high, but in the Middle East there is a fourth consecutive quarter of pipeline declines

26 August, 2020

Most regions around the world are understandably experiencing slight delays to hotel construction project timelines of approximately two to four months and a reason behind Europe and the Middle East currently seeing a record number of projects under construction in the pipeline. However, the latter region is actually seeing a fourth consecutive quarter with pipeline declines, now a year-long trend since a cyclical peak in the second quarter of 2019.

According to the latest edition of the Hotel Construction Pipeline Trend Report from Lodging Econometrics (LE), at the close of the second quarter of 2020, Europe’s hotel construction pipeline increased +9% by project level and +13% by new rooms to end the quarter with 1,851 projects and 295,038 rooms.

Projects under construction now stand at an all-time high of 923 projects with 149,637 rooms. There are 477 projects containing 75,818 rooms scheduled to start construction in the next 12 months, while there are 451 projects with 69,583 rooms in the early planning stage. The record construction pipeline has been influenced by just 35 new hotels with 5,998 rooms opening in the first quarter of 2020, the lowest number of project openings recorded in the region since 2012, according to LE.

The United Kingdom, with its own all-time high level, leads the construction pipeline with 350 projects and 52,398 rooms, ahead of Germany with 323 projects and 58,533 rooms, France with 172 projects and 21,405 rooms, Portugal – also at an all-time high – with 123 projects and 14,329 rooms, and then Poland with 91 projects and14,257 rooms.

At a city level, London has the largest pipeline with 94 projects and 16,542 rooms, ahead of Dusseldorf with 57 projects and 11,254 rooms, Paris with 40 projects and 6,350 rooms, Libson with 38 projects and a record high room count total of 4,173, and Hamburg, also at an all-time high, with 35 projects and 7,496 rooms.

Four global franchise companies account for almost half (44%) of all projects in Europe’s Pipeline. They are Accor Hotels with 236 projects and 32,092 rooms, Marriott International, with 217 projects and 36,108 rooms, Hilton Worldwide with, an all-time high of, 207 projects and 32,696 rooms, and then InterContinental Hotels Group (IHG) with 151 projects and 24,276 rooms.

In terms of individual property brands Accor’s Ibis brands lead with 106 projects and 13,510 rooms, while elsewhere within the Accor portfolio Mercure and Novotel have a similar number of projects in the pipeline – 26 projects with 3,075 rooms and 25 with 3,890 rooms, respectively.

At Marriott International the Moxy brand has the biggest pipeline in Europe amounting to 72 projects with 12,876 rooms, a long way ahead of Courtyard by Marriott with 27 projects and 4,739 rooms, and Autograph Collection with 22 projects and 2,873 rooms.

Elsewhere, Hilton Worldwide’s pipeline in Europe is led by Hampton by Hilton at all-time record high totals of 79 projects and12,575 rooms, ahead of Hilton Garden Inn with 45 projects and 7,545 rooms, and DoubleTree by Hilton with an all-time high 30 projects with 3,802 rooms. Meanwhile, IHG’s top brands include Holiday Inn Express with 65 projects and 9,840 rooms, Holiday Inn with 28 projects and 6,798 rooms, and Hotel Indigo with 17 projects and 1,793 rooms.

It is a different story when we consider the Middle East hotel construction pipeline and where LE’s latest report shows that levels at the end of the second quarter of 2020 had fallen to 591 projects and 169,538 rooms. The region’s pipeline is down -7% by projects and -6% by rooms year-over-year and this represents the fourth consecutive quarter the pipeline has declined since reaching its cyclical peak by projects at this time last year.

However, the number of projects under construction stand at an all-time high of 363 projects and 117,458 rooms, influenced by the coronavirus pandemic. Only seven new hotels accounting for 1,469 rooms where opened during the Apr-2020 to Jun-2020 three month window.

Notably though, projects scheduled to start construction in the next 12 months are down around a third year-on-year as at the end of the second quarter of 2020 – 31% by projects and 34% by rooms to 109 projects with 25,658 rooms. Projects in the early planning stage are at 119 projects and 26,422 rooms.

Saudi Arabia leads the region’s pipeline with 210 projects and 69,610 rooms, ahead of the United Arab Emirates with 186 projects and 55,797 rooms. These are both a long way ahead of Egypt with a record 60 projects and 14,641 rooms, Qatar with 57 projects and an all-time high room count of 14,538, and Oman with 36 projects and 6,967 rooms.

Dubai continues to lead the construction pipeline in the United Arab Emirates accounting for more than three quarters of the pipeline (144 projects and 44,895 rooms), while cities with the largest hotel construction pipelines are the Provincial region with 67 projects and 14,104 rooms, Riyadh with record high totals of 62 projects with 12,414 rooms, Doha, Qatar with 50 projects and 12,234 rooms, Jeddah with 50 projects and 10,705 rooms and Makkah with 31 projects and 32,387 rooms.

The three leading franchise companies for the Middle East at the end of the second quarter were Hilton Worldwide with a high of 96 projects offering 26,188 rooms, ahead by Marriott International with 88 projects having 21,875 rooms and Accor with 84 projects and 25,277 rooms. These three companies alone account for almost half (45%) the projects in the pipeline in the Middle East.

The leading brand in the pipeline among these companies is Hilton’s DoubleTree with 26 projects and 6,355 rooms, just ahead of Hilton Hotel & Resort with 22 projects and 7,070 rooms; Marriott’s Courtyard has 21 projects and 4,382 rooms and its Residence Inn brand has all-time high 17 projects accounting for 2,057 rooms, while Accor’s top brands are the Ibis brands with 13 projects and 4,474 rooms, Adagio City Aparthotel with 11 projects and 2,288 rooms, and Novotel with 11 projects and 2,857 rooms.