U.S. construction pipeline at more than 5K

According to the third-quarter Construction Pipeline Trend Report for the U.S. from Lodging Econometrics (LE), the U.S. construction pipeline stands at 5,317 projects/629,489 rooms, up 10% by projects and 6% rooms year-over-year (YOY).

At the close of Q3, there are 987 projects/135,050 rooms under construction in the U.S. Projects scheduled to start construction in the next 12 months stand at 2,074 projects/236,894 rooms, up 14% by projects and 13% by rooms YOY, respectively. Project counts in the early planning stage reached record highs in Q3, standing at 2,256 projects/257,545 rooms, a 14% increase by projects and 7% increase in rooms YOY.

The lodging industry is healthy, and many hotel owners are expected to experience record-high revenues this year. As lending rates have changed significantly due to the Federal Reserve’s rate increases, ownership and management groups are finding that reinvesting in their current portfolios, whether that be renovating or repositioning to another brand, is a better return on investment right now. At the end of Q3, brand conversion room counts reached record highs of 988 projects/99,474 rooms. The renovation pipeline remained strong as well, with 893 projects/140,440 rooms; some of the highest counts dating back to Q3 2018. Combined, renovation and conversion activity accounts for 1,881 projects/239,914 rooms, up 36% YOY by projects and 50% by rooms YOY.

Travel throughout the U.S., in all segments, saw steady recovery over the summer months and is expected to continue into the fall and winter months. New project announcements and construction starts continue to recover from the lows experienced during the COIVD pandemic. The new-construction pipeline in the U.S. continues to grow, albeit, at a moderate, modest pace, with projects in the early planning stage establishing a new peak for this cycle. This peak signals a favorable outlook by developers for development conditions to improve in the near future.

The upper-midscale chainscale continues to have the largest project count of all chainscales in the total U.S. construction pipeline at Q3, standing at 2,127 projects/214,473 rooms. Following upper-midscale, is upscale which stands at 1,528 projects/202,907 rooms at the close of the quarter. Together, project counts in the pipeline for those two chainscales account for 69% of all projects.

The brands with the largest number of projects in the upper-midscale chainscale are Home2 Suites by Hilton with 494 projects/50,809 rooms; IHG Hotels & Resorts’ Holiday Inn Express 297 projects/28,323 rooms; and Marriott’s TownePlace Suites with 291 projects/27,329 rooms. In the upscale chainscale, the top brands are Marriott’s Residence Inn with 234 projects/28,659 rooms and its SpringHill Suites brand with 148 projects/16,350 rooms, followed by IHG’s Staybridge Suites with 125 projects/12,962 rooms.

At the end of Q3, 1,846 projects/189,289 rooms in the U.S. construction pipeline are extended-stay projects, accounting for 35% of projects in the total pipeline. Home2 Suites by Hilton currently has the largest extended-stay pipeline with 494 projects/50,809 rooms, followed by Marriott’s TownePlace Suites with 291 projects/27,329 rooms and its Residence Inn brand with 234 projects/28,659 rooms.

Thus far, throughout this year, the U.S. opened 343 new hotels, accounting for 39,772 rooms, with another 182 projects/22,261 rooms anticipated to open by the end of the year. This represents a 1.1% increase in new hotel supply. LE analysts expect new hotel openings to increase in 2023 and 2024, representing a 1.3% supply increase for 2023 and a 1.4% supply increase for 2024.