As the economy revives, the pace of activity quickens. And financial backing is lined up. Suffolk Construction is hired and building begins. University Park Hotel is scheduled to open in August. All commercial real estate has an element of instability.
Booms create new skylines and office parks, while busts show how transient market values can be.
But the instability of hotels seems especially pronounced. An accounting of the cyclical behavior of the U.S. lodging industry comes from William C. Wheaton and Laurence Rosoff of the Massachusetts Institute of Technology. Economic expansions spur both business and leisure travel, while recessions cause firms to tighten travel budgets, and individuals to curtail vacations. By contrast, room prices and new construction move in patterns that bear little connection to short-term demand. In other property markets, rents respond sharply to changes in occupancy, and construction follows not long after.