New hotel construction is starting to slow after years of rapid building and robust supply. While consumer demand remains strong, construction spending has dropped, the Wall Street Journal reports.
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Hotel construction spending has more than tripled since it plummeted in 2011, but a combination of oversupply in larger markets and stricter lending standards in the second quarter has caused the pace of development to slow.
Construction labor shortages have also contributed to problems in the hotel sector as skilled workers demand more money, putting more financial pressure on owners.
In the first seven months of the year, New York, Miami, Austin and Dallas all experienced declines in revenue per available room growth compared to the year prior. Meanwhile, hospitality giants Hilton and Marriott continue to lead the industry in both size and average daily room rates, CoStar reports.
Marriott posted 1.3% year-over-year growth in its Q2 North American ADRs in addition to adding another 16,000 rooms. Hilton reported an ADR increase of 1.1% and added another 13,400 rooms during the same period, CoStar reports.
The industry is also experiencing major consolidation activity through mergers and acquisitions.
To compete, smaller hotels are considering consolidation in order to offer a larger stock of rooms at competitive rates. According to CoStar, mergers could also aid lodging operators in offering better customer loyalty rewards programs and attracting property owners and franchisees.
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