Hotel construction tends to come in waves, resulting in
a) a major increase of capital flowing into the industry
b) excess supply
c) excess demand
d) low interest rates on loans and mortgages
I think the answer is b, excess supply. Because since hotel in under construction,it is either close or not a lot of room available. Which results in low supply. Is this right?
I agree that b is the best answer.
Actually, the correct answer is a) a major increase of capital flowing into the industry.
Hotel construction tends to come in waves because it typically follows cycles of economic growth and development. During periods of economic expansion, there is increased demand for hotel accommodations due to increased travel and tourism. This creates an opportunity for hotel developers and investors to capitalize on the growing market.
As a result, there is a major increase in capital flowing into the hotel industry. This influx of funds allows for the construction and expansion of new hotels, increasing the overall supply of hotel rooms available in the market. However, it is important to note that this increased supply may ultimately lead to excess supply in certain cases if the rate of hotel construction exceeds the growth rate of demand.
Excess supply (answer b) may occur if the rate of hotel construction outpaces the demand, resulting in an oversupply of hotel rooms. This can potentially lead to lower occupancy rates and price competition among hotels, negatively impacting profitability.
Excess demand (answer c) refers to a situation where the demand for hotel accommodations exceeds the available supply. This can occur during peak travel seasons or in destinations with limited hotel capacity. In such cases, hotels may be fully booked, and room rates may increase due to the high demand.
Low interest rates on loans and mortgages (answer d) can be a contributing factor to the increase in hotel construction. When interest rates are low, developers and investors may find it more affordable to borrow money for hotel construction projects, leading to more construction activity in the industry.
So, in summary, the correct answer to your question is a) a major increase of capital flowing into the industry, as hotel construction tends to come in waves due to economic growth and development.