At the end of Q4 2009, the total Construction Pipeline for EMEA has 1,373 projects/285,770 rooms. Pipeline counts have now declined 22% by projects and 23% by rooms since the Q2 2008 peak. They are expected to decline further, as concerns about the pace of economic recovery, the industry’s operating performance and lending issues persist and continue to impact developer sentiment.

Depleted by high cancellations and a late surge in New Openings, total Pipeline counts are in an end-of-cycle contraction. In 2009, total Cancellations/Postponements in EMEA removed nearly 96,000 rooms from the Pipeline. As the lending environment is not expected to rebound any time soon, Cancellations/Pos

tponements will likely remain high for the near-term. New Hotel Openings coming online as additional supply will stay at an elevated rate, particularly in the Middle East and Africa, where New Openings will accelerate through 2011. Meanwhile, New Project Announcements (NPAs) into the Pipeline, which have been in a low channel for four consecutive quarters, are expected to remain at these low levels, which are far from sufficient to offset declining Pipeline trends.

Europe

At the end of Q4, Europe’s Pipeline is at 746 projects/128,113 rooms. This is the sixth straight quarter of declines, with project totals having fallen 27% and rooms by 26% from the Pipeline’s peak in Q2 2008. 357 projects/65,296 rooms are currently Under Construction, representing 48% of total projects and 51% of rooms. These high percentages are indicative of a rapidly decreasing Pipeline.

The lack of available financing continues to impact both the rate of project migration up the Pipeline towards construction and the flow of NPAs into the Pipeline.

Both Construction Starts and NPAs remain in a low channel in Q4 and will stay that way, as the availability of lending is not expected to change in the near future. Projects that are able to obtain financing are mostly smaller-sized. Construction Starts for the quarter average just 160 rooms. 85% of Construction Starts and 89% of NPAs have already selected a brand, as the marketing and operating benefits of a brand are increasingly compelling to developers and lenders.

A total of 239 new hotels/36,654 guest rooms opened in 2009. New Hotel Openings are forecast to remain historically high in 2010 with 200 hotels/32,908 rooms coming online. In 2011, New Openings are projected to decrease to 153 hotels/26,581 rooms, reflecting the ongoing contraction of total Pipeline counts. This downward trend will continue going forward as Pipeline totals decrease further.

Middle East

Total Pipeline counts declined for a sixth consecutive quarter to 451 projects/124,133 rooms in Q4. Project counts are down 19% and room counts down 24% from the peak. With mounting concerns over Dubai’s sovereign debt problems and its impact on development and lending throughout the region, further declines in Pipeline totals are expected.

Along with difficulties in sourcing financing, decreases in room demand and even deeper declines in room rates are keeping NPAs in a low channel, accelerating Pipeline count declines and signaling the end of this development cycle. Now nearing the back end of the cycle, projects that are smaller and those associated with a brand are becoming more attractive to developers. 53% of total NPAs in Q4 are 200 rooms or less, with a growing 68% already having chosen a brand. Cancellations and Postponements remain at an elevated rate, particularly for larger projects and those without a brand. 54% of projects cancelled or postponed in Q4 are larger than 250 rooms, with 5 cancelled projects having 600 rooms or more. Over half of Q4’s cancellations/postponements have no brand affiliation.

73 hotels with 20,475 rooms opened in 2009. With 51% of total Pipeline projects and 55% of rooms now Under Construction, New Openings will ramp up through 2011, causing new supply to grow at an increasing rate. 90 new hotels/24,508 rooms are forecast to open in 2010, then 104 hotels/30,553 rooms will enter as new supply in 2011. Thereafter, New Hotel Openings will begin to taper off as a result of the shrinking Pipeline.

Africa

Totaling 176 projects/33,524 rooms at the end of Q4, project counts in Africa are off by 2% and rooms by 9% from the Pipeline peak. They are the smallest Pipeline percentage declines of any region in the world. However, the same directional trends impacting the Middle East are apparent in Africa as well. NPA’s are at cyclical lows and project Cancellations and Postponements continue to run high. The Pipeline began to unfold in earnest as New Openings in 2009. New Openings are expected to be at historic highs through 2010 and 2011. Working together, these metrics indicate that total Pipeline counts will decline further into mid-decade, bringing this development cycle to a close.