LE: Marriott, Dallas lead Q3 U.S. hotel construction pipeline

According to the third-quarter report by analysts at Lodging Econometrics (LE), Marriott has the largest U.S. construction pipeline among franchise companies and Dallas is the top market during Q3.

Franchise companies
Marriott International leads with 1,286 projects/166,174 rooms, Hilton with 1,223 projects/139,742 rooms and InterContinental Hotels Group (IHG) with 769 projects/77,558 rooms. The construction pipelines for these three franchise companies comprise 68% of the total construction pipeline projects.

The leading brands by project count in the construction pipeline for each of these three companies are Hilton’s Home2 Suites by Hilton with 402 projects/41,846 rooms, IHG’s Holiday Inn Express with 301 projects/28,852 rooms and Marriott’s Fairfield Inn with 246 projects/23,653 rooms. These three mid-market brands alone account for 20% of the projects in the total construction pipeline.

Other significant brands in the pipeline for these franchises include Hilton’s Hampton by Hilton, reaching a cyclical peak, with 271 projects/28,311 rooms and Tru by Hilton with 224 projects/21,518 rooms; Marriott’s TownePlace Suites with 204 projects/19,5693 rooms and Residence Inn with 203 projects/25,132 rooms; IHG’s Avid Hotel with 152 projects/13,255 rooms and Staybridge Suites with 122 projects/12,564 rooms.

In the third quarter alone, Marriott opened 60 new hotels/7,882 rooms accounting for 30% of all new hotel rooms that opened in the U.S. Hilton opened 45 new hotels/4,923 rooms accounting for 19% of newly opened rooms and IHG opened 25 new hotels in Q3/2,459 rooms accounting for 9% of rooms. Year-to-date, through the end of the third quarter, Marriott has opened 212 new hotels/28,298 rooms accounting for 32% of new hotels and 33% of new rooms; Hilton has opened 169 new hotels/21,786 rooms, accounting for 25% of new hotels and 26% of newly opened rooms, and IHG opened 98 new hotels/9,828 rooms, accounting for 15% of new hotels and 12% of rooms opened in the U.S.

The LE forecast for new hotel openings in 2021 anticipates that Marriott will open 243 projects/32,944 rooms by year-end. Hilton is expected to open a total of 207 projects/26,056 rooms in 2021, and IHG is on track to open 145 projects/14,451 rooms. In 2022, LE forecasts Marriott will open 245 new hotels/31,470 rooms, IHG will open 204 new hotels/20,737 rooms and Hilton is expected to open 192 new hotels/22,090 rooms.

Top markets
The top five markets with the largest total hotel construction pipelines by projects are Dallas with 147 projects/17,711 rooms, Atlanta with 139 projects/18,659 rooms, Los Angeles with 133 projects/22,145 rooms, New York City with 130 projects/22,417 rooms and Houston with 90 projects/9,225 rooms. These top five markets account for 13% of the projects and 15% of rooms in the total U.S. pipeline.

The top 25 U.S. markets account for 33% of all pipeline projects and 37% of all rooms in the U.S. hotel construction pipeline. There are currently nine markets in the U.S. that have 20 or more projects under construction in their pipelines. Markets with the greatest number of projects already in the ground are New York with 95 projects/16,516 rooms, Atlanta with 33 projects/5,311 rooms, Dallas with 31 projects/4,399 rooms, Los Angeles with 30 projects/4,954 rooms and Austin with 28 projects/3,577 rooms.

Atlanta has the greatest number of projects scheduled to start construction in the next 12 months, with 54 projects/7,529 rooms. Dallas follows with 48 projects/5,643 rooms, and then Los Angeles with 47 projects/7,343 rooms, Phoenix with 44 projects/4,834 rooms and Houston with 42 projects/3,748 rooms. The top five markets with the greatest number of projects in the early planning stage at the end of the third quarter are Dallas with 68 projects/7,669 rooms, Los Angeles with 56 projects/9,848 rooms, Atlanta with 52 projects/5,819, Orlando with 41 projects/7,754 rooms and Washington, DC with 40 projects/7,310 rooms.

The increased demand for building materials and shortages in supply, in the wake of the COVID-19 pandemic, has led to higher prices and continues to be major hurdles for contractors, developers and investors. Nevertheless, in the third quarter, Dallas has the highest number of new projects announced into the pipeline with 18 projects/1,756 rooms. Atlanta follows with 17 projects/1,777 rooms, Phoenix with 10 projects/1,819 rooms and then Houston with 9 projects/946 rooms.

The renovation and conversion pipeline shows no sign of decline. Presently, there are 1,253 hotels/176,305 rooms under renovation or conversion across the U.S., and 24 of the top 50 markets in the U.S. currently have 10 or more hotels undergoing renovation or conversion activity at the end of Q3 this year.

In the first three quarters of 2021, the U.S. opened 665 new hotels with 85,306 rooms. The markets with the highest number of new openings throughout the first three quarters are New York City with 21 hotels/3,554 rooms, Atlanta with 21 hotels/2,925 rooms, Orlando with 19 hotels/2,908 rooms, Houston with 16 hotels/2,166 rooms and Nashville with 16 hotels/2,116 rooms. In Q3, alone, the top 50 markets in the U.S. saw 98 hotels /15,454 rooms open. The U.S. had 189 hotels/25,995 rooms total open in the third quarter.

In 2021, New York City is forecast to open 51 new hotels and 7,074 rooms, Atlanta follows with 25 hotels/3,499 rooms, then Nashville with 23 hotels/3,011 rooms, Houston with 23 hotels/2,787 rooms and Orlando with 21 hotels/3,393 rooms. U.S. supply growth is forecast to be 2% in 2021 and is expected to remain the same into 2022.