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
Office Buildings | Feb 18, 2015
Commercial real estate developers optimistic, but concerned about taxes, jobs outlook
The outlook for the commercial real estate industry remains strong despite growing concerns over sluggish job creation and higher taxes, according to a new survey of commercial real estate professionals by NAIOP.
Mixed-Use | Feb 13, 2015
First Look: Sacramento Planning Commission approves mixed-use tower by the new Kings arena
The project, named Downtown Plaza Tower, will have 16 stories and will include a public lobby, retail and office space, 250 hotel rooms, and residences at the top of the tower.
Codes and Standards | Feb 12, 2015
New Appraisal Institute form aids in analysis of green commercial building features
The Institute’s Commercial Green and Energy Efficient Addendum offers a communication tool that lenders can use as part of the scope of work.
Architects | Feb 11, 2015
Shortlist for 2015 Mies van der Rohe Award announced
Copenhagen, Berlin, and Rotterdam are the cities where most of the shortlisted works have been built.
| Jan 20, 2015
Daring hotel design scheme takes the shape of cut amethyst stone
The Dutch practice NL Architects designed a proposal for a chain of hotels shaped like a rock cut in half to reveal a gemstone inside.
| Jan 2, 2015
Construction put in place enjoyed healthy gains in 2014
Construction consultant FMI foresees—with some caveats—continuing growth in the office, lodging, and manufacturing sectors. But funding uncertainties raise red flags in education and healthcare.
| Dec 28, 2014
AIA course: Enhancing interior comfort while improving overall building efficacy
Providing more comfortable conditions to building occupants has become a top priority in today’s interior designs. This course is worth 1.0 AIA LU/HSW.
| Dec 28, 2014
7 fresh retail design strategies
Generic ‘boxes’ and indifferent service won’t cut it with today’s savvy shoppers. Retailers are seeking a technology-rich-but-handmade vibe, plus greater speed to market and adaptability.
| Dec 2, 2014
Nonresidential construction spending rebounds in October
This month's increase in nonresidential construction spending is far more consistent with the anecdotal information floating around the industry, says ABC's Chief Economist Anirban Basu.
| Nov 29, 2014
20 tallest towers that were never completed
Remember the Chicago Spire? What about Russia Tower? These are two of the tallest building projects that were started, but never completed, according to the Council on Tall Buildings and Urban Habitat. The CTBUH Research team offers a roundup of the top 20 stalled skyscrapers across the globe.
