— U.S. Spring Edition —
LE’s New Business Opportunities
Your quarterly pulse on hotel development trends and LE news
For the First Quarter Ending March 31, 2020, the U.S. Hotel Construction Pipeline Continued to Expand Year-Over-Year Despite COVID-19*
At the end of the first quarter of 2020, analysts at Lodging Econometrics (LE) report that the total U.S. construction pipeline continued to expand year-over-year (YOY) to 5,731 projects/706,128 rooms, up 1% by projects and 3% by rooms. However, quarter-over-quarter, the pipeline has contracted slightly less than 1% by both project and room counts, down from 5,748 projects/708,898 rooms at the close of 2019.
Projects currently under construction stand at an all-time high of 1,819 projects/243,100 rooms. Projects scheduled to start construction in the next 12 months total 2,284 projects/264,286 rooms, while projects in the early planning stage stand at 1,628 projects/198,742 rooms. Projects in the early planning stage are up 8% by projects and 11% by rooms, YOY. Developers with projects under construction have generally extended their opening dates by two to four months. For projects scheduled to start construction in the next 12 months, on average, developers have adjusted their construction start and opening dates outwards by four to six months. Additionally, brands have been empathetic with developers by relaxing timelines as everyone adjusts to the COVID-19 interruptions. As a result, LE anticipates a stronger count of openings in the second half of 2020, compared to the first half.
In the first quarter of 2020, the U.S. opened 144 new hotels with 16,305 rooms. While the COVID-19 pandemic has slowed development, it has not completely stalled it. There were still 312 new projects with 36,464 rooms announced into the pipeline in the first quarter.
Many open or temporarily closed hotels have already begun or are in the planning stages of renovating and repositioning their assets while occupancy is low or non-existent. At the close of the first quarter, LE recorded 769 active renovation projects/163,030 rooms and 616 active conversion projects/69,258 rooms throughout the United States.
To date, the largest fiscal relief and stimulus efforts include the unprecedented $2 trillion CARES Act, the Paycheck Protection Program (PPP), and the Paycheck Protection Program Liquidity Facility (PPPLF), with a third phase of relief having been signed by the president last week. This third phase includes nearly $500 billion to further support the small-business loan program, as well as provide additional critical funding needed for hospitals and comprehensive testing. A phase four “CARES Act 2” package is already being discussed.
In order to support the economy and build liquidity, the Federal Reserve cut interest rates to almost zero; reduced bank reserve requirements to zero; rapidly purchased hundreds of billions of dollars in treasury bonds and mortgage-backed securities; bought corporate and municipal debt; and extended emergency credit to non-banks. The Federal Reserve has signaled that it will provide more support to the economy if warranted.
Although there are discussions about opening parts of the country that are beginning to stabilize; it will be measured with phased openings designed to effectively balance a highly desired economic ramp up while following prudent health and safety precautions.
Marriott, Hilton and IHG Account for 69% of the Projects in the U.S. Hotel Construction Pipeline at the Close of the first quarter of 2020*
According to the United States Construction Pipeline Trend Report from Lodging Econometrics (LE), the franchise companies with the largest construction pipelines at the end of the first quarter of 2020 are Marriott International with 1,556 projects/204,244 rooms, followed by Hilton Worldwide with 1,413 projects/161,743 rooms, and InterContinental Hotels Group (IHG) with 954 projects/97,547 rooms. Combined, the brands of these three franchise companies comprise 69% of the projects in the total U.S. pipeline.
The leading brands by project count for these three companies continue to be Hilton’s Home2 Suites by Hilton with 421 projects/43,816 rooms, IHG’s Holiday Inn Express with 380 projects/36,329 rooms, and Marriott’s Fairfield Inn with 315 projects/30,336 rooms. These three brands dominate the total pipeline and combined represent 20% of the projects.
Other notable brands in the pipeline for each of these franchise companies are: Hampton by Hilton with 310 projects/32,146 rooms and Hilton’s Tru by Hilton with 302 projects/29,132 rooms; Marriott’s TownePlace Suites with 217 projects/21,834 rooms and Residence Inn with 214 projects/26,262 rooms; IHG’s Avid Hotel with 195 projects/17,595 rooms and Staybridge Suites with 149 projects/15,564 rooms.
In the first quarter of 2020, 144 new hotels having 16,305 rooms opened across the United States. Of those openings, Marriott opened 42 hotels/5,595 rooms, Hilton opened 37 hotels/3,840 rooms, and IHG opened 23 hotels/2,204 rooms. Collectively, these three franchise companies opened 71% of all the new hotels and rooms in the first quarter.
LE recorded conversion pipeline totals of 616 projects/69,258 rooms in the first quarter of 2020. Of these conversion totals, Marriott claimed 81 projects/14,242 rooms, Hilton with 67 projects/10,646 rooms, and IHG recording 53 projects/5,553 rooms. These three franchise companies account for 44% of all the rooms in the conversion pipeline across the United States.
The Los Angeles Market Continues to Lead the U.S. Hotel Construction Pipeline at the Close of the First Quarter of 2020*
Analysts at Lodging Econometrics (LE) report that at the close of the first quarter of 2020, the top five U.S. markets with the largest total hotel construction pipelines are: Los Angeles with 166 projects/27,752 rooms; Dallas with 164 projects/19,999 rooms; New York City with 152 projects/26,111 rooms; Atlanta with 143 projects/19,423 rooms; and Houston with 132 projects/13,316 rooms.
Nationally, under construction project counts hit a new all-time high with 1,819 projects with 243,100 rooms. Markets with the greatest number of projects already in the ground are led by New York City with 108 projects/18,434 rooms. Atlanta follows with 48 projects/6,002 rooms, and then Dallas with 46 projects/5,603 rooms, Los Angeles with 43 projects/6,851 rooms, and Orlando with 39 projects/9,394 rooms. Collectively, these five markets account for 16% of the total number of projects currently under construction in the U.S.
In the first quarter, Dallas had the highest number of new projects announced into the pipeline with 13 projects/1,461 rooms. Washington DC follows with 8 projects/1,145 rooms, then Phoenix with 8 projects/904 rooms, Los Angeles with 7 projects/1,103 rooms, and Atlanta with 7 projects/774 rooms.
As has been widely reported, the majority of hotels across America are experiencing an extreme decrease in occupancy and some have even closed temporarily. Many companies are using this time to complete updates, plan or start renovations or reposition their assets. LE recorded renovation and conversion totals of 1,385 active projects/232,288 rooms in the first quarter of 2020. The markets with the largest count of renovation and conversion projects combined are Chicago with 32 projects/5,565 rooms, Washington DC with 26 projects/5,491 rooms, Los Angeles with 26 projects/4,271 rooms, New York City with 21 projects/8,151 rooms and San Diego with 21 projects/4,456 rooms.
*COVID-19 (coronavirus) did not have a full impact on first quarter 2020 U.S. results reported by LE. Only the last 30 days of the quarter were affected. LE’s market intelligence department has and will continue to gather the necessary global intelligence on the supply side of the lodging industry and make that information available to our subscribers. It is still early to predict the full impact of the outbreak on the lodging industry. We will have more information to report in the coming months.