According to the Q2 2023 United States Construction Pipeline Trend Report by Lodging Econometrics (LE), at the close of the second quarter, the hotel construction pipeline stands at 5,572 projects/660,061 rooms, with projects up 7% year-over-year (YOY) and rooms up 6% YOY.
The hotel construction pipeline grew incrementally quarter-over-quarter (QOQ), as developers and franchise companies push through short-term challenges while envisioning long-term prospects. Inflation, higher interest, rates and the general “wait and see” attitude of developers have prevailed in the economy in recent months; however, developers continue to believe in the strength of the economy long-term as witnessed by the continued growth in the pipeline.
At the end of Q2, the total pipeline is only 5% from its all-time peak in terms of projects. Certainly, some head winds remain, but hotel developers are locking down prime locations for development now and in the coming months.
A bright spot for the economy and the hotel industry is the increased consumer confidence and sentiment which among other things has led to strong demand for guest rooms. This strong demand is expected to continue through the rest of the summer and into the fall with heavy tourist demand through August and the kick-off of the fall conference season after Labor Day.
Projects under construction have experienced modest QOQ growth over the past year and currently stand at 1,062 projects/141,681 rooms, up 10% and 8% YOY, respectively. Projects scheduled to start construction in the next 12 months saw an 11% increase in projects and 12% increase in rooms YOY, to stand at 2,232 projects/260,595 rooms at the close of the second quarter.
This increase highlights the fact that projects are progressing through the planning process and developers are sourcing funding to get “into the ground”. Year-over-year project counts in the early planning stage changed minimally and ended Q2 ’23 with 2,278 projects/257,785 rooms. The second quarter, however, marks the tenth consecutive quarter that the number of rooms in early planning has been over 200,000.
Upscale, upper-midscale hotel construction projects dominate
Upscale and upper midscale new construction projects dominate the pipeline at Q2, accounting for 62% of the projects and 57% of the rooms in the total U.S. construction pipeline. These two chain scales also represent 63% of the projects and 57% of the rooms anticipated to open through year-end 2023 and are expected to have the highest guest room growth rates through 2025.
Announced renovations and brand conversions, combined, reached record high project counts over the last four quarters, accounting for 1,939 projects/253,473 rooms, with upscale, upper midscale, and economy brands accounting for the majority of these projects at the end of 2023’s second quarter.
Extended-stay hotel projects have also been on the rise in the U.S., increasing consecutively over the last eight quarters. At the Q2 close, there were 2,083 extended-stay projects, with 214,557 rooms in the U.S. hotel construction pipeline. Extended-stay projects account for 32% of projects under construction in the total pipeline, 42% of projects scheduled to start construction in the next 12 months, and 36% of the projects in early planning across the U.S.
In 2022, 130 extended-stay hotels opened, adding 13,647 rooms to the U.S. supply. For 2023, 180 extended-stay projects/18,713 rooms are expected to open. In 2024, 236 projects/24,281 rooms, and in 2025, 319 projects/32,798 rooms are forecast to open in the extended-stay segment. The extended stay segment is growing at 2.5 to 3.5 times the actual and forecasted industry growth rates from 2022-2025.
For the entire U.S., during the first and second quarters, 224 new hotels with 27,194 rooms opened. LE is forecasting another 384 projects/48,607 rooms to open in 2023 for a total of 608 new hotels/75,801 rooms by year-end. This represents a 1.4% increase in new supply for 2023. The total year-end forecast for 2023 represents a 22% YOY increase over the number of new hotels that opened in 2022, which stood at 475 hotels/56,157 rooms.
In 2024, 700 new hotel projects with 79,422 rooms are expected to open, for another 1.4% increase in new supply growth. And announcing for the first time, LE analysts expect 808 projects/87,462 rooms to open in 2025 for a 1.5% increase in new supply.
Related Stories
| Jun 18, 2014
Arup uses 3D printing to fabricate one-of-a-kind structural steel components
The firm's research shows that 3D printing has the potential to reduce costs, cut waste, and slash the carbon footprint of the construction sector.
| Jun 13, 2014
First look: BIG's spiraling museum for watchmaker Audemars Piguet
The glass-and-steel pavilion's spiral structure acts as a storytelling device for the company's history.
| Jun 12, 2014
Austrian university develops 'inflatable' concrete dome method
Constructing a concrete dome is a costly process, but this may change soon. A team from the Vienna University of Technology has developed a method that allows concrete domes to form with the use of air and steel cables instead of expensive, timber supporting structures.
| Jun 11, 2014
Bill signing signals approval to revitalize New Orleans’ convention center corridor
A plan to revitalize New Orleans' Convention Center moves forward after Louisiana governor signs bill.
| Jun 9, 2014
Green Building Initiative launches Green Globes for Sustainable Interiors program
The new program focuses exclusively on the sustainable design and construction of interior spaces in nonresidential buildings and can be pursued by both building owners and individual lessees of commercial spaces.
| Jun 2, 2014
Parking structures group launches LEED-type program for parking garages
The Green Parking Council, an affiliate of the International Parking Institute, has launched the Green Garage Certification program, the parking industry equivalent of LEED certification.
| May 30, 2014
Developer will convert Dallas' storied LTV Building into mixed-use residential tower
New Orleans-based HRI Properties recently completed the purchase of one of the most storied buildings in downtown Dallas. The developer will convert the LTV Building into a mixed-use complex, with 171 hotel rooms and 186 luxury apartments.
| May 29, 2014
7 cost-effective ways to make U.S. infrastructure more resilient
Moving critical elements to higher ground and designing for longer lifespans are just some of the ways cities and governments can make infrastructure more resilient to natural disasters and climate change, writes Richard Cavallaro, President of Skanska USA Civil.
| May 28, 2014
Must see: Check out this one-of-a-kind lobby covered with 2,150 pieces of reclaimed wood
The recently opened NewActon Nishi apartment complex in Canberra, Australia, features one of the more unique lobby spaces you'll see, with thousands of pieces of repurposed timber suspended from the walls and ceiling.
| May 23, 2014
Top interior design trends: Gensler, HOK, FXFOWLE, Mancini Duffy weigh in
Tech-friendly furniture, “live walls,” sit-stand desks, and circadian lighting are among the emerging trends identified by leading interior designers.
