A look at pipeline completion times across Europe

The number of new room openings across Europe has increased consistently over the last decade. Over that span, the industry went from roughly 50,000-60,000 new room openings per year to more than 70,000 in 2018 and 2019.

With Europe experiencing substantial growth in supply during the last 10 years, STR’s pool of historical pipeline data provides a great opportunity to analyze the completion time of projects across the continent.

The timing for such analysis is useful given the questions around the impact of COVID-19, which is likely to slow overall growth somewhat, but not lead to a total halt. For comparison, when we looked at the number of rooms opened in 2010, only a few years following the global financial crisis, the number of new room openings still hit 60,000—higher than following years.

Before jumping into our findings, it is important to note that for this study, we established the following parameters.

• Only new construction projects are considered.
• The timeframe of hotel openings analysed is from 2013 to 2019.
• Only projects completed between 12 to 60 months were considered.
• In the country-level analysis, only countries with more than 10 completed projects between 2013 to 2019 were considered.
• Projects that have moved through phases multiple times have also been removed.

Europe and its subcontinents

Europe’s finalized hotel projects between 2013 and 2019 took 28.8 months on average to complete. When digging deeper into subcontinents, Eastern Europe (32.0 months) showed the longest completion time, while Southern Europe (27.9) produced the fastest.

Countries
To drill down further into completion time this time by country, we see that Russia (33.5 months) reported the longest completion time, while Poland (31.6 months) also contributed to the higher completion time of the Eastern Europe subcontinent.

The United Kingdom and Germany, the two countries in Europe with the largest active pipelines in 2020, came in just below average with projects taking 28.6 and 28.4 months, respectively, over the last decade.

Further down the list, Italy’s projects took on average around 26.4 months to complete, contributing to Southern Europe being the subcontinent with the fastest completion time.

Ireland completes projects the fastest at 24.5 months, almost two full months quicker than the nearest country (Italy).

Chain scales
Segmenting hotels by chain scale is also useful to carve out insights into how development time differs between independent and branded hotels, but also looking at those branded projects to see how they differed from Economy through to Luxury.

The development of independent hotels on average complete at a faster rate than branded projects, taking just over 24 months to complete. The key reason here is down to the difference between the average of rooms per hotel seen between independent and branded hotels with the former typically being smaller in size.

Economy chain hotels completed in the second-quickest time at 27.3 months, nearly three months longer than independents. From there, we see a sequential increase through to luxury chains which take 34.3 months nearly three years on average to complete.

Property size
Segmenting completed pipeline projects by hotel size (number of rooms) shows to expectation that smaller hotels are completed the quickest at 26.6 months on average. We then see an upward trend with the greater the number of rooms in a hotel producing longer times to complete with hotels sized between 100-249 rooms taking on average 29.4 months and hotels larger than 250 room taking 32.3 months across Europe. A significant variance of around six months exists between 0-99 rooms compared with 250+ rooms.

Conclusion
In a “normal” year, these historical trends on pipeline development can likely offer accurate insights into how future pipeline may develop. This year, COVID-19 has placed additional pressures on hotel development, likely leading to less projects completing in the short term and lockdown restrictions leading to increased delays in hotels being built. Nonetheless, we see different patterns in completion time across Europe as well as different segments of hotels completing faster than others. That is unlikely to change.

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