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Your quarterly pulse on hotel development trends and LE news
For the Second Quarter of 2019, the U.S. Hotel Construction Pipeline Continued Its Year-Over-Year Growth Spurt Even as Business Investment Declined for the First Time Since 2016
Analysts at Lodging Econometrics (LE) reported for the second quarter of 2019, the total U.S. construction pipeline climbed to 5,653 projects/693,207 rooms, up 6% by projects and 9% by rooms year-over-year (YOY). Pipeline totals are just 230 projects shy of the all-time high of 5,883 projects/785,547 rooms reached in the second quarter of 2008.
Projects currently under construction stand at 1,727 projects/233,600 rooms with projects scheduled to start construction in the next 12 months at 2,552 projects/295,989 rooms. Both are at the highest levels since early 2008. Projects in the early planning stage stand at 1,374 projects/163,618 rooms.
In the first half of 2019, the industry opened 456 new hotels with 53,427 rooms. An additional 599 projects/66,300 rooms are expected to open by year-end. In 2020, the LE forecasts for new hotel openings continues to rise with 1,161 new hotels/129,531 rooms scheduled to open. In 2021, with a growth rate of 2.5%, 1,206 new hotels with 139,793 rooms are likely to open as a result of the current robust pipeline. Should all these hotels come to fruition, 2021 will register the highest count for new hotel openings since 2009.
Trendline analysis suggests that the pipeline is in a topping out formation as new project announcements into the pipeline in the second quarter are at 359 projects/ 44,895 rooms, their lowest count since the fourth quarter of 2014. Brand to brand conversions have also declined over the last year and are at the lowest level since the end of 2016.
Although government spending and consumer sentiment and spending remain strong, these declines can be attributed to business spending declines which has turned negative for the first time since early 2016. Declines are due primarily to the uncertainty caused by trade and tariff problems and the slowing global economy.
Leading Companies and Brands in the U.S. Hotel Development Pipeline
In the Lodging Econometrics (LE) second quarter report for 2019, the franchise companies leading the United States hotel construction pipeline are Marriott International with 1,469 projects/193,458 rooms, up 9% by projects and rooms year-over-year (YOY). Next, coming off of last quarter’s all-time high, is Hilton Worldwide currently at 1,372 projects/152,853 rooms, a 3% increase YOY. InterContinental Hotels Group (IHG) follows with 962 projects/97,647 rooms, also up 3% by projects and rooms, YOY.
The leading brands in the construction pipeline for each of these three companies are Home2 Suites by Hilton with 413 projects/43,040 rooms, IHG’s Holiday Inn Express with 410 projects/38,814 rooms, and Marriott’s Fairfield Inn with 300 projects/29,133 rooms.
Other prominent brands in the pipeline for these franchise companies are Tru by Hilton with 312 projects/30,254 rooms and Hampton by Hilton with 301 projects/31,271 rooms; Marriott’s Residence Inn with 207 projects/25,201 rooms and TownePlace Suites with 206 projects/21,468 rooms; and IHG’s Avid Hotel with 179 projects/16,316 rooms and Staybridge Suites with 156 projects/16,309 rooms. These leading and prominent brands together comprise 44% of all the projects in the total pipeline.
In the first half of 2019, 70% of the new hotels that opened in the U.S. belonged to Marriott, Hilton or IHG. Marriott opened 120 new hotels/15,429 rooms, Hilton opened 125 new hotels/14,553 rooms and IHG opened 69 new hotels/7,406 rooms.
The LE forecast for new hotel openings in 2020 anticipates that Marriott will open 285 projects/36,504 rooms. Next is Hilton with 274 projects/30,099 rooms, followed by IHG with 211 projects/20,412 rooms.
In 2021, LE forecasts that Marriott will open 328 new hotels/40,841 rooms, IHG to open 284 new hotels/27,810 rooms and Hilton to open 268 new hotels/29,373 rooms. Should all these hotels come to fruition, these three companies will continue their dominance opening 73% of all the new hotels in 2021.
Leading Markets in The U.S. Hotel Construction Pipeline
At the end of the first half of 2019, analysts at Lodging Econometrics (L.E.) report that the top five markets with the largest hotel construction pipelines are New York City with 166 projects/28,231 rooms. Next are Dallas and Los Angeles with 162 projects/19,972 rooms and 158 projects/25,428 rooms, respectively. Houston follows with 146 projects/14,998 rooms, and Atlanta with 130 projects/17,280 rooms. With the exception of NYC and Houston, these top markets are at record high counts.
The top ten markets in the pipeline including the five markets mentioned above plus Nashville, Austin, Orlando, Detroit, and Charlotte account for 25% of the rooms in the total pipeline. Ten states claim a whopping 61% of the rooms in the pipeline: Texas, California, Florida, New York, Georgia, Tennessee, North Carolina, Michigan, Colorado, and Ohio.
For the first half of 2019, the U.S. has opened 456 new hotels/53,527 rooms with another 599 new hotels/66,300 rooms expected to open by year-end. Reflective of the robust pipeline, L.E.’s forecast for new hotel openings will continue to rise through 2021.
Twenty-five percent of the new hotels forecast to open between now and the 2021 year-end are concentrated in ten markets. These markets are New York City, Los Angeles, Orlando, Dallas, Atlanta, Nashville, Houston, Washington DC, Miami, and Phoenix. The top 25 markets are forecast to open 40% of the rooms expected to open.