Overbuilding is a term we used to hear a lot in the context of the
lodging business. Then we started hearing it a lot in the context
of the cruise business. Now the hotels are at it again.
There's a cause-and-effect thing going here. The last hotel
building boom ended in a bust when a surplus of rooms coincided
with the Gulf War, a recession and a fall-off in real-estate
values. Investors stayed away from the hotel industry while demand
caught up with supply, which it began to do in the early 1990s.
Fueled by record profits in the mid-1990s, new construction
starts in the hotel business soared to record highs, totaling
465,000 construction starts between 1997 and 1999. But that pesky
law of supply and demand just won't go away. As those opening days
approach, PricewaterhouseCoopers is predicting that revenue per
available room next year will show its weakest growth since
So what do travel agents need to know about the lodging
industry's little roller coaster? We made a list.
First, you could be a passenger. Second, hotel companies are
being told by various Web wonks and analysts that they lag behind
the airlines in using the Internet to broaden their distribution
and to move excess inventory. Third, it is against this background
that Bass, Cendant, Hilton, Hyatt, Marriott and Starwood are
putting together a joint Web site to provide them with what they
call "more efficient distribution on line." Hilton International,
Accor and Forte are doing the same thing in Europe for the same
reasons. Fourth, no matter which way the roller coaster goes from
here, those Web sites won't go away.
We suspect a large number of travel agents won't go away either,
but we also suspect that they're getting tired of being jerked
around. It's no fun running a business with your arms up in the