How much construction is enough?

Guestroom occupancy across the U.S. continues to push record numbers in most markets, but as property construction continues to increase month after month, some areas are adapting better than others. 

West Palm Beach, Fla., is one example of a location that may be reaching its saturation point at current demand levels. While occupancy rates in the county rose 9.2 percent between 2010 and 2014, and yearly increases in revenue per available room over the same period ranged from 7.2 percent to 12.2 percent (according to CBRE, as reported by The Real Deal), some experts worry that the influx of construction coming to the area may cause those numbers to quickly stagnate once hotels start opening.

New properties coming to West Palm Beach include the $110-million, 400-room West Palm Beach Hilton developed by Related Cos. and a 152-room Residence Inn by Marriott. Four other projects have already been approved for the city, and five more are in the planning stages for downtown. These projects are expected to add 1,544 rooms to the destination's 15,000 – a more than tenfold increase. 

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"I'm definitely concerned that this is too many," Paul Weimer, VP of CBRE Hotels in Miami, told The Real Deal. The problem, according to Weimer, is that  developers follow a herd mentality in some markets, opening too many rooms too fast when numbers are good. And according to My West Palm Beach, the numbers are good. Despite flat hotel bookings, ADR grew 6.4 percent in September, one of the market's slowest months. Developers see this and flock to bring more rooms to the area.

Other markets are also feeling the sting of the building boom. The Times Union reported that over the past two years the addition of hundreds of rooms to Saratoga County, N.Y., is beginning to take its toll on occupancy, which fell to 72.7 percent in October. This is the fifth consecutive month of declines for the area, with August (the peak month for demand) saw a drop of 6 percent to 84.3 percent. Falling occupancy was also recorded in Albany County, N.Y., down 71.8 percent for the fourth month of declines in a row.

"We are seeing the occupancy go down because of the supply," Todd Garofano, president of the Saratoga Convention and Tourism Bureau, told the Times Union. "There comes a point when enough is enough."

Even Charleston, S.C., one of the top tourism destinations in the U.S., may have enough rooms. The Charleston City Paper reported that city mayor candidate John Tecklenburg's campaign includes the promise of a one-year moratorium for new hotel approvals if elected. Some, such as Wayne Smith, associate professor and chair of College of Charleston's department of hospitality and tourism management, believe that such an action would have little effect on the city's hotel industry, but the high level of development for the area is provoking gut reactions like those of Tecklenburg.

"Sometimes it's good for the community to stop and take a breath. Let residents catch up and then figure out a plan that makes sense where you can balance residents' needs with the tourists' needs," Smith told the Charleston City Paper. "That's something Charleston's always been good at. We are a livable city. This is what attracts tourism here. We're a living, breathing city. We're not a tourist district. We're a city that people are coming here and enjoying, so we've got to make sure that we're doing everything to maintain the reason people are coming."

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