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Report: diminishing supply to help mid-market hotels.

Mid-market and limited-service hotel properties are most likely to benefit from the estimated 22,000 to 24,000 hotel rooms that have been removed from existing stock each year since 1987, according to "Coopers & Lybrand Hospitality Directions."

Coopers & Lybrand's analysis of Smith Travel Research (STR) data shows the typical hotel that closed in the past several years is a slightly larger than average, mid- to lower-end, full-service property located in an urban or suburban location. Most (60 percent) were independents prior to closure, and few chainaffiliates were higher than the middle of the brand scale.

"The elimination of uncompetitive supply will enhance the appeal and competitiveness of mid-market and limited-service properties," said Dr. Bjorn Hanson, Coopers & Lybrand's hospitality consulting industry chairman. "However, it will have little effect on the upper end of the market."

"Coopers & Lybrand Hospitality Directions" notes that while 62 percent of all hotels were unprofitable in 1991, only a relatively small percentage of recently built hotels have been shuttered. "Closing a hotel is avoided by most owners, because it results in an immediate and drastic decline in asset value," Hanson says. "Reopening a closed hotel is difficult, because it requires both a large sum of capital and a huge marketing effort. Some closed hotels have been converted to other uses, such as single room occupancy residential, commercial, and a few to nursing homes, but most are demolished."

With the removal of older hotels, the combined market share of chain organizations is further consolidating the industry, according to Hanson.
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Title Annotation:hotel rooms being removed from existing market in New York, New York each year since 1987
Publication:Real Estate Weekly
Date:Jul 15, 1992
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