HENDERSONVILLE, Tennessee—As hotel development has continued to stall, expected hotel conversion activity has changed since the same period last year. Total planned conversions declined by 17% from July 2009 to July 2010. Proposed branded hotel conversions declined by 7%, and planned independent conversions declined 27% during the same period.
As noted in the chart below, as of July 2009, 53% of planned conversions were from independent hotels converting to a chain scale. However, as of July 2010, 47% of proposed conversions were from independent hotels. In both years, the chain scale with the most anticipated conversions out of its current affiliation was the midscale-without-food-and-beverage segment (17% as of July 2009 and 20% as of July 2010). Economy hotels were not far behind with planned conversions (15% as of July 2009 versus 18% in the same period in 2010).
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As of July 2009, 48% of branded hotels planned conversions in the same chain scale; this number, however, jumped to 55% as of July 2010. In this analysis we assumed midscale with F&B is a higher-tier chain scale than midscale without F&B (because of the added restaurant component). Proposed hotel conversions that planned to move to a higher-tier chain scale shifted from 37% as of July 2009 to 31% as of July 2010. Hotels that planned to downgrade their chain scale remained flat at 15% to 14%.
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Interestingly, not much change was anticipated with independent hotels that were planning on becoming branded hotels. Most notably, as of July 2009, 43% of proposed independent conversions were slated to become economy branded hotels, but the trend shifted downwards to 34% as of July 2010. Additionally, anticipated conversions from independent to upper-upscale chains moved from 5% in July 2009 to 9% in July 2010.
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