At year-end 2013 the total construction pipeline in Europe stood at 734 projects/126,249 rooms, down 5 percent and 1 percent respectively from the previous year (Chart 1). Widespread austerity measures have slowed the region?s overall economic recovery and contributed to a sluggish pipeline.
The economic recovery remains fragile. Europe will need to continue making adjustments to overcome new financial hurdles caused by the U.S. Federal Reserve?s reduction in its quantitative easing program and the uneasiness surrounding Russia?s interference in Ukraine.
The total pipeline in the Middle East stands at 276 projects/77,972 rooms, down 14 percent and 16 percent respectively year-over-year (YOY) (Chart 1). Since peaking in 2007, pipeline trends have been in a steady decline. ?The global financial crisis severely impacted the region as lending evaporated and the real estate market collapsed.
More recently, projects that were previously stalled in the pipeline are now moving toward construction and eventual completion. The potential for any large injection of new project announcements into the pipeline remains remote as the region is still absorbing the influx of previous hotel openings. Further declines in the pipeline are expected into 2015.
European Pipeline Struggles to Gain Momentum
The European pipeline remains locked in a bottoming formation. A surge of projects in the previous real estate cycle caused hotels under construction to peak in late Q2 2012 before dropping for six consecutive quarters. New project announcements and construction starts entering the pipeline are at the lowest levels LE has tracked since beginning to record European development in 2007.
This means new hotel openings coming online will continue to trend downward and drop below the 2013 mark of 221 hotels/30,062 rooms. LE?s forecast calls for a new low of 211 hotel openings in both 2014 and 2015.
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Source:? Patrick “J.P.” Ford (2014), Construction pipelines in Europe and Middle East continue their decline, Hotel Management?http://www.hotelmanagement.net/economic-trends/construction-pipelines-in-europe-and-middle-east-continue-their-decline-27549 published May 06, 2014. Viewed May 12, 2014.