According to the 2023 year-end U.S. Construction Pipeline Trend Report from Lodging Econometrics (LE), the pipeline stands at 5,964 projects/693,963 rooms. The pipeline hit record project counts at Q4, with the addition of 260 hotel construction projects and 21,287 rooms over last quarter, and a 9% increase by projects and a 7% increase by rooms year-over-year (YOY). The previous project count high was Q2 2008 with 5,883 projects.
At the close of 2023’s fourth quarter, there are 1,118 projects/141,768 rooms under construction, up 11% by projects and 5% by rooms YOY. Hotel projects scheduled to start within the next 12 months stand at 2,259 projects/261,582 rooms, up 9% by projects and 11% by rooms YOY. Projects and rooms in the early planning stage hit all-time highs at Q4, standing at 2,587 projects/290,613 rooms, and up 9% by projects and 4% by rooms YOY.
RELATED CONTENT:
Notably, the number of combined hotel renovations and brand conversion projects in the U.S. continued its upward growth trend through the end of 2023, closing the year with record project and room counts of 2,028 projects/303,330 rooms.
The upper midscale segment has the highest project count of all chain scales in the total U.S. hotel construction pipeline at the Q4 close, reaching an all-time high of 2,245 projects/218,112 rooms. The second largest is the upscale category, which has 1,445 projects/177,999 rooms. Together, these two chain scales comprise 62% of all projects in the country’s total pipeline at the Q4 close.
Rate cuts point to positive but cautious outlook for hotel construction
The recent Federal Reserve signaling of three 25-basis-point interest rate cuts in 2024 and additional cuts in 2025 sends a positive but cautious outlook for U.S. hotel development in the year ahead. With the anticipation of multiple rate cuts in 2024, hotel development seems poised for constructive growth well beyond 2024. The primary reason lies in less expensive borrowing costs, providing long-awaited relief on interest rates. This is expected to have a favorable impact not only on new construction but acquisitions, renovations, and conversions as well.
Despite the positive outlook, lenders continue to be vigilant, and many investors continue with a “wait and see” attitude; holding out hope for potentially deeper rate cuts. We expect this cautious, yet optimistic approach will continue through 2024, however, we expect to see investors re-engaging, which, as we can tell by the pipeline numbers and record-high project counts, has already begun. We expect lending volume to increase slowly in the first half of 2024 and then gradually pick up the pace in the second half of the year.
In 2023, the U.S. had 474 new hotels/60,436 rooms open, a 1.1% growth rate in new supply, bringing the total U.S. census to 59,636 hotels/5,655,356 rooms. In 2024, LE analysts expect the existing supply of hotels in the U.S. to increase 1.4% with the opening of 677 new hotels and 79,518 rooms. The LE forecast for new hotel openings shows this growth trajectory will continue through 2025, with another 799 new hotels/85,654 rooms forecast to open by year-end 2025 and further growth anticipated for 2026 and beyond.
Related Stories
Modular Building | Oct 12, 2018
DeSimone Consulting Engineers designs the tallest modular hotel in the United States
The hotel was originally designed as a cast-in-place concrete structure.
Mixed-Use | Oct 4, 2018
Four-story hotel and adjacent affordable housing community opens in California’s Sonoma County
Axis/GFA Architecture and Design was the architect for the project.
Reconstruction & Renovation | Aug 21, 2018
The massive facelift of New York’s famed Waldorf Astoria moves into Phase Two
The refurbished hotel will feature fewer, but larger, guest rooms.
Hotel Facilities | Aug 10, 2018
How hospitality design makes spaces of all types better for users
Responding to these shifting expectations, building owners and design teams working in other markets now regularly embrace leading ideas from the world of hospitality and infuse them into their projects.
Hotel Facilities | Aug 1, 2018
'Home away from home' is hoteliers' newest theme
Creating an experience, with the accent on local color, is flavoring hotel design.
Mixed-Use | Jul 17, 2018
Water Street Tampa’s developer reveals details about this project’s public spaces
This $3 billion waterfront neighborhood will also include three hotels.
Sponsored | Hotel Facilities | Jul 13, 2018
Hotel renovation: More than just minding the dust
Do you know the vital signs for avoiding moisture & mold problems? Will your brand standards cause you headaches? How will you recover costs if you do get into trouble?
Adaptive Reuse | Jul 9, 2018
Work, park, live: Inside Cincinnati’s parking garage turned lifestyle hotel
The Summit hotel and conference center is a converted parking garage that was once a factory.
Hotel Facilities | Jun 20, 2018
Zaha Hadid Architects-designed Morpheus Hotel includes world’s first free-form high-rise exoskeleton
The hotel provides 147, 860 sm of space across 42 floors.
| May 30, 2018
Accelerate Live! talk: An AEC giant’s roadmap for integrating design, manufacturing, and construction
In this 15-minute talk at BD+C’s Accelerate Live! conference (May 10, 2018, Chicago), Skender CEO Mark Skender and Chief Design Officer Tim Swanson present the construction giant’s vision for creating a manufacturing-minded, vertically-integrated design-manufacturing-build business model.
