REAL ESTATE DEVELOPERS NEVER LEARN

Real estate developers must really have short memories. They get hit over the head with the sledgehammer of reality every few years, declare bankruptcy or beg for their drug dealer at the Fed to give them some more of the good stuff, and come back for another round of idiocy.

Total hotel revenue in the U.S. was 4.2% higher in 2013 than it was in 2007. But, over this time frame the number of new hotels has increased total hotels by 11%.

Almost 2,700 new hotels were built at the peak of the market in 2008/2009. Revenue declined, occupancy rates plunged, and revenue per room plummeted. New hotel construction collapsed by 70% in 2011 and 2012. Now here we go again.

New hotel construction doubled in 2013 and will approach record levels again in 2014. If real median household income is lower than it was in 1999 and real wages are stagnant, who is staying at all these hotels? Are the 1% really having that much fun?

The reason for the building boom in 2007 – 2009 was the easy money policies of the Federal Reserve. Hundreds of real estate developers should have gone under after 2008, but the Fed propped them up with 0% interest rates and allowing them to extend their loans and pretend they were making their loan payments.

The current Fed created easy money bubble has convinced these developers to do it all over again. I’m sure it will work out this time.

Infographic: Hotels in the US | Statista

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