Hotel Development Trends & Projections
The U.S. Hotel Construction Pipeline Shows Positive Growth Year-Over-Year at Q3 2022 Close
According to the third quarter Construction Pipeline Trend Report for the United States 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 in 2022. As lending rates have changed significantly in 2022 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 2022, 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 chain scale continues to have the largest project count of all chain scales 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, upper midscale and upscale project counts in the pipeline account for 69% of all projects.
The brands with the largest number of projects in the upper midscale chain scale are Home2 Suites by Hilton with 494 projects/50,809 rooms; InterContinental Hotels Group’s (IHG) Holiday Inn Express 297 projects/28,323 rooms; and Marriott’s TownePlace Suites with 291 projects/27,329 rooms. In the upscale chain scale, 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 ’22, 1,846 projects/189,289 rooms in the U.S. Construction Pipeline are extended stay projects; accounting for 35% of projects in the total U.S. pipeline. Home2 Suites by Hilton currently has the largest extended stay pipeline with 494 projects/50,809 rooms. The brand with the second largest number of projects in the extended stay pipeline at Q3 2022, is Marriott’s TownePlace Suites with 291 projects/27,329 rooms, followed by its Residence Inn brand with 234 Projects/28,659 Rooms.
Thus far, throughout 2022, 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 for 2022. 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.
Three Franchise Companies Account for 66% of the Projects in the U.S. Construction Pipeline at Q3 ’22
According to the quarterly United States Construction Pipeline Trend Report from Lodging Econometrics (LE), the franchise companies with the largest construction pipelines at the end of Q3 2022 are led by Marriott International with 1,385 projects/168,725 rooms. Following Marriott is Hilton Worldwide with 1,351 projects/152,383 rooms, and InterContinental Hotels Group (IHG) with 787 projects/79,382 rooms. Combined, these three companies account for 66% of the projects and 64% of the rooms in the total pipeline. Each company has seen growth year-over-year.
These three franchise companies also have the most projects and rooms in each stage of the construction pipeline. Marriott leads with the greatest number of projects in the under construction stage with 259 projects/35,946 rooms, then Hilton with 248 projects/31,698 rooms, and IHG with 135 projects/15,688 rooms currently under construction.
At the close of the third quarter, Marriott also leads with the most projects scheduled to start construction in the next 12 months with 739 projects/87,626 rooms, followed by IHG with 484 projects/46,957 rooms, and Hilton with 333 projects/38,043 rooms.
Hilton set record high project and rooms counts in the early planning stage at the Q3 close, totaling 770 projects/82,642 rooms. Marriott currently has 387 projects/45,153 rooms in early planning and IHG closed the quarter with 168 projects/16,737 rooms in the early planning stage.
The brands of each of these companies with the largest number of projects in the pipeline at Q3 are Hilton’s Home2 Suites with 494 projects/50,809 rooms; IHG’s Holiday Inn Express with 297 projects/28,323; and Marriott’s TownePlace Suites with 291 projects/27,329 rooms. Other prominent brands in the pipeline for these franchise companies are the Hampton by Hilton brands with 281 projects/28,543 rooms; Marriott’s Fairfield Inn with 238 projects/21,988 rooms; and IHG’s Avid Hotel brand with 135 projects/11,445 rooms.
Through the end of the third quarter, Marriott opened 102 new hotels/12,908 rooms. Hilton opened 90 new hotels/10,834 rooms, and IHG opened 40 projects/4,120 rooms.
LE analysts forecast Marriott will open the most new hotels in 2023 with 168 hotels/20,952 rooms. Next is Hilton with 136 new hotels/17,049 rooms, followed by IHG with 89 new hotels/9,588 rooms. In 2024, LE forecasts that Marriott will open 192 new hotels/22,815 rooms. Hilton is expected to open 154 new hotels/16,967 rooms and IHG is expected to open 142 new hotels/14,596 rooms.
Dallas has the Largest Hotel Construction Pipeline at the Close of the Third Quarter of 2022
According to the third quarter United States Construction Pipeline Trend Report from Lodging Econometrics (LE), the U.S. market with the largest hotel construction pipeline by projects is Dallas with a record high count of 174 projects, accounting for 20,676 rooms. Following Dallas is Atlanta with 139 projects/17,843 rooms, Los Angeles with 118 projects/19,062 rooms, Phoenix with 113 projects/15,508 rooms, and New York with 102 projects/17,805 rooms.
U.S. markets with the most projects currently under construction are New York with 69 projects/11,781 rooms and Atlanta with 25 projects/3,798 rooms. Following New York and Atlanta is Phoenix, with 24 projects/5,126 rooms, Dallas with 23 projects/3,390 rooms, and Austin with 22 projects/3,135 rooms.
At the Q3 close, Atlanta has the most projects scheduled to start in the next 12 months with 63 projects/8,026 rooms, followed by Dallas with 63 projects/7,355 rooms, Phoenix with 53 projects/5,837 rooms, Los Angeles with 48 projects/7,461 rooms, and then Houston with 36 projects/4,227 rooms.
Dallas also has the largest project count for hotel projects in the early planning stage, standing at 88 projects/9,931 rooms at the Q3 close. Following Dallas is Los Angeles with 51 projects/8,668 rooms in the early planning stage, then Atlanta with 51 projects/6,019 rooms, Orlando with 46 projects/8,039 rooms, and Nashville with 44 projects/5,519 rooms.
Within the first three quarters of 2022, the markets with the greatest number of new openings are New York City, Austin, Nashville, Atlanta, and Detroit.
LE analysts forecast the New York market will have the most new hotel openings in 2022 with 38 new hotels/5,066 rooms, for a 4.2% growth rate. The New York market is also expected to have the greatest number of new hotel openings in the U.S. in 2023, with 39 projects/7,208 rooms, for a growth rate of 5.8%. In 2024, Phoenix is forecast to open the most new hotels, with 29 projects/4,062 rooms, for a 5.6% growth rate.