20 May 2019
May 20, 2019

LE Hotel Development Forecaster

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— U.S. Edition —

LE Hotel Development Forecaster

Your quarterly pulse on hotel development trends and LE news



The U.S. Hotel Construction Pipeline Continues to Grow in the First Quarter as the Economy Shows Surprising Strength

At the end of the first quarter of 2019, analysts at Lodging Econometrics (LE) reported that the total U.S. construction pipeline continued to expand with 5,647 projects/687,941 rooms, up a strong 7% by projects and 8% by rooms year-over-year (YOY). Pipeline totals are a mere 236 projects, or 4%, shy of the all-time high of 5,883 projects/785,547 rooms reached in the second quarter of 2008. The record should be pierced later in the year. Conversions and renovations are already at record levels.

Projects currently under construction stand at 1,709 projects/227,924 rooms with projects scheduled to start construction in the next 12 months at 2,429 projects/281,395 rooms. Projects in the early planning stage stand at 1,509 projects/178,622 rooms.

The upscale, upper-midscale, and midscale chain scales, all reached record-highs for both projects and rooms. Sixty-six percent of projects in the total pipeline are concentrated in two chain scales: upscale and upper midscale.

Annualized construction starts are at the highest level since 2008. In 2019, LE forecasts a 2.2% supply growth rate with 1,038 new hotels/118,385 rooms expected to open. For 2020, LE anticipates 1,174 new hotel openings and 128,598 rooms.

Hotel operations had a good quarter but mostly from expense improvements. Only 7 of the top 25 markets showed occupancy increases, quarter-over-quarter (QOQ). Only 11 markets had rev-par increases. Overall, U.S. demand growth was up 2.4% while supply was up 2%.


Leading Markets in The U.S. Construction Pipeline


In the first quarter of 2019, analysts at Lodging Econometrics (LE) report that the top five markets with the largest hotel construction pipelines are New York City with 170 projects/29,247 rooms. Next are Dallas and Los Angeles, both at record highs, with 163 projects/19,689 rooms and 158 projects/25,578 rooms, respectively. Houston follows with 151 projects/15,643 rooms, and Nashville with 116 projects/15,599 rooms.

Markets with the greatest number of projects already under construction are New York with 119 projects/20,068 rooms, Dallas with 48 projects/6,265 rooms, and Los Angeles with 42 projects/6,288 rooms. Houston has 36 projects/4,162 rooms while Nashville, Austin, and San Jose all have 34 projects presently under construction.

Reflective of the increasing pipeline, LE’s forecast for new hotel openings will continue to rise through 2020. In 2019, New York City tops the list with 63 new hotels expected to open with 9,605 rooms, followed by Dallas with 30 projects/3,604 rooms, Houston with 28 projects/3,342 rooms, Austin with 25 projects/2,512 rooms, and Nashville with 23 projects/3,030 rooms. In the 2020 forecast, New York continues to lead with the highest number of new hotels anticipated to open with 44 projects/6,225 rooms followed by Los Angeles with 35 projects/5,140 rooms and Dallas with 33 projects/4,163 rooms.

The number of markets where supply growth is now exceeding demand growth continues to increase. At the first quarter, 18 of the top 25 markets experienced the shift, up from 12 of the top 25 markets at the end of the fourth quarter of 2018.

Markets of concern where new supply is already outpacing demand and future new openings are forecasted to be high are Houston, New York, Dallas and Los Angeles.


IHG’s Holiday Inn Express, Hilton’s Home2 Suites, and Marriott’s Fairfield Inn Account for 20% of U.S. Construction Pipeline Projects


In the Lodging Econometrics (LE) first quarter report for 2019, analysts detailed the leading franchise companies and their brands in the construction pipeline. Leading in the pipeline is Marriott International with 1,499 projects/196,771 rooms and Hilton Worldwide with 1,386 projects/154,349 rooms, both at all-time record highs. InterContinental Hotels Group (IHG) follows with 980 projects/99,115 rooms. These three franchise companies alone comprise 68% of the projects in the total pipeline.

The leading brands in the construction pipeline by project count for each of these three companies are IHG’s Holiday Inn Express with 416 projects/39,078 rooms, Home2 Suites by Hilton with 415 projects/43,122 rooms, and Marriott’s Fairfield Inn with 305 projects/29,566 rooms. Twenty percent of the projects in the pipeline are derived from these three brands combined.

Other notable brands in the pipeline for each of these franchise companies are: Tru by Hilton with 313 projects/30,329 rooms and Hampton by Hilton with 305 projects/31,468 rooms; Marriott’s Residence Inn with 213 projects/25,936 rooms and TownePlace Suites with 209 projects/21,733 rooms; IHG’s Avid Hotel with 172 projects/15,728 rooms and Staybridge Suites with 164 projects/17,086 rooms.

New project announcements remain in a strong upswing for these companies. In the first quarter, Marriott announced 89 new projects/11,742 rooms, Hilton announced 101 projects/11,192 rooms and IHG announced 64 projects/6,848 rooms.

In the first quarter of 2019, Marriott opened 70 new hotels/9,974 rooms, Hilton opened 58 hotels/7,264 rooms and IHG opened 36 hotels/4,359 rooms.

The LE forecast for new hotel openings in 2019, anticipates that Marriott will open 278 projects/34,467 rooms. Next is Hilton with 266 projects/29,554 rooms followed by InterContinental Hotels Group with 156 projects/16,284 rooms.

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