With tourism and corporate travel declining and hoteliers cutting room rates dramatically to stay in business, Patel decided to delay the May construction of the 91-room, extended-stay hotel to November.
"Tourism is down right now," said Patel, who operates hotels in the region. "Everyone is cutting back."
It's a choice more businesses are making — it has become more difficult to get financing for projects, and it's not clear when the market will improve. The number of U.S. hotel rooms in the pipeline dropped nearly 25 percent in June, compared with the same month last year, to 501,476 rooms, according to Hendersonville-based Smith Travel Research. In Nashville, about 2,500 rooms are in some phase of planning or construction.
"Financing a hotel is nearly impossible," said Rick Frazier, vice president of marketing and leasing for Alex S. Palmer & Co. The developer has put on hold West End Summit, a 25-story combined Intercontinental Hotel and condo project on West End Avenue in Nashville. "I don't know of anybody that can put a project together in this environment."
The commercial mortgage-backed securities market, which provided funding for many hotel developments, still remains tight, Frazier said. The alternative — traditionalbanks — is requiring developers to come up with 40 percent equity, or cash investment, to qualify for a loan, a nearly impossible financial commitment for many developers. A few years ago, developers could get a loan with 15 percent down.
The hotel at West End Summit was supposed to be completed next year, but construction hasn't even started, and there's no telling when it will.
The Fairfield Inn and the Hampton Inn, two hotel projects in the Nashville West shopping area with more than 100 rooms each, have been put on hold. So has the 109-room Residence Inn at the SuperTarget off Interstate 24 and Sam Ridley Parkway in Smyrna.
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