U.S. Hotel Construction Pipeline Increases in All Project Stages Year-Over-Year

In the latest United States Construction Pipeline Trend Report from Lodging Econometrics (LE), analysts report that construction pipeline projects in the U.S. continue to increase, standing at 5,545 projects/658,207 rooms at the close of Q1 2023. Up 9% by both projects and rooms year-over-year (YOY); project totals at Q1 ‘23 are just 338 projects, or 5.7%, behind the all-time high of 5,883 projects recorded in Q2 2008.

At the close of the first quarter, projects currently under construction stand at 1,051 projects/140,365 rooms, each showing 9% growth YOY. Projects scheduled to start construction in the next 12 months are at 2,060 projects/241,568 rooms, each up 8% YOY. Projects in the early planning stage account for 44% of the projects in the total U.S. construction pipeline at Q1. Early planning projects increased 10% YOY, setting an all-time high of 2,434 projects/276,274 rooms.

This is the fourth consecutive quarter of total pipeline growth for the U.S., which can be, in part, attributed to the robust recovery of travel demand. Increased consumer confidence and spending activity has fueled strong occupancy and rate growth throughout the last twelve months as well. Developers are motivated to sign new projects anticipating more favorable financing conditions in the coming quarters. Owners are eager to wrap up existing brand conversion and renovation projects, which have been a substantial focus for many quarters now.

The U.S. hotel construction pipeline is expected to grow modestly or just incrementally through 2023. There are no growth spikes expected this year. The pipeline is back loaded, meaning there is ample opportunity for vendors/suppliers in the industry, and third party management companies.

At the Q1 close, sixty-two percent of projects in the total pipeline are concentrated within the upscale and upper midscale chain scales. These two chain scales continue to dominate the pipeline and that is not expected to change anytime soon.

Renovation and brand conversion activity in the U.S. continues to boom in early 2023, reaching record project counts of 1,953 hotels/253,533 rooms, for a 38% YOY increase by projects and a 37% YOY increase by rooms. LE expects renovation and conversion activity to continue into 2023 as owners spend to bring their hotels into alignment with current brand standards or look elsewhere for new brand identification.

A total of 103 new hotels/11,762 rooms opened in the U.S. in the first quarter. For the remainder of the year, LE forecasts another 493 new hotel projects/59,355 rooms to open, representing a combined 1.3% supply growth rate in 2023. LE analysts expect the upward growth in new hotel openings to continue with an additional 699 new hotel projects/81,574 rooms anticipated to open in 2024, for a 1.4% supply increase.

Marriott, Hilton, and IHG Continue to Dominate

In the recently released United States Construction Pipeline Trend Report from Lodging Econometrics (LE), analysts detailed the leading franchise companies and their brands in the construction pipeline at the close of the first quarter. Marriott International (Marriott) tops the charts with the greatest number of projects in the U.S. hotel construction pipeline, at Q1 2023, with 1,499 projects/181,377 rooms, followed closely by Hilton Worldwide (Hilton), with a record-high count of 1,436 projects/161,359 rooms, and then InterContinental Hotels Group (IHG) with 809 projects/80,679 rooms. Combined, these three franchise companies comprise 68% of the projects in the total U.S. pipeline.

Marriott also has the most projects and room counts in each stage of the pipeline at Q1, with 279 projects/38,156 rooms currently under construction, 763 projects/90,038 rooms scheduled to start construction in the next 12 months, and 457 projects/53,183 rooms in early planning.

The leading brands by project count for the three companies with the largest pipelines in the U.S. at Q1 are Home2 Suites by Hilton with all-time highs by projects and rooms of 546 projects/56,001 rooms, Marriott’s TownePlace Suites, also reaching all-time highs by projects and rooms at Q1, with 333 projects/31,068 rooms, and IHG’s Holiday Inn Express brand with 301 projects/28,371 rooms. These three brands collectively represent 21% of the projects in the total U.S. hotel construction pipeline at the close of Q1 2023.

LE recorded record-high conversion pipeline totals of 1,079 projects/110,084 rooms for the U.S. in the first quarter of 2023. Of these conversion totals, Hilton had the most conversion projects and room totals ever recorded by LE with 105 projects/14,456 rooms, similarly, Marriott had a record 100 conversion projects, accounting for 13,465 rooms, and IHG had 52 conversion projects/6,2543 rooms. These three franchise companies account for 31% of all the rooms in the conversion pipeline across the country.

The franchise companies with the greatest number of new project announcements in the first quarter were: Hilton with 110 projects/11,790 rooms, Marriott with 61 projects/6,730 rooms, and IHG with 33 projects/3,103 rooms. These companies represent 60% of all new projects announced in the U.S. in Q1 2023.

In Q1 2023, Marriott opened 33 new hotels with 3,711 rooms. Hilton opened 24 new hotels with 2,781 rooms, and IHG opened 6 new hotels with 629 rooms. The LE forecast for new hotel openings in 2023 anticipates that Marriott will open a total of 152 new hotel projects/19,064 rooms by year-end, Hilton is forecasted to open 141 new hotel projects/16,980 rooms in 2023, and IHG is expected to open 88 new hotel projects/9,975 rooms. These three franchise companies collectively account for 64% and 65%, respectively, of new hotel projects and rooms forecast to open in 2023.

Year-over-year Growth in the Hotel Construction Pipeline for the Top 25 U.S. Markets as a Group

In the Q1 2023 U.S. Construction Pipeline Trend Report released by Lodging Econometrics (LE), LE analysts report, that as a group, year-over-year the hotel construction pipeline has grown in the Top 25 Markets in the U.S. The top five U.S. markets with the largest hotel construction pipelines at the close of the first quarter are led by Dallas with, record-high project and room counts of 184 projects/21,810 rooms. Following are Atlanta with 144 projects/18,242 rooms, Los Angeles with 118 projects/19,066 rooms, Phoenix with 117 projects/16,100 rooms, and Nashville with 115 projects/15,354 rooms.

Markets with the greatest number of projects already under construction at the Q1 close are New York with 54 projects/8,682 rooms, Atlanta with 26 projects/4,278 rooms, and the Inland Empire with 26 projects/2,584 rooms. Dallas has 25 projects/3,739 rooms while Phoenix has 24 projects/5,155 rooms projects presently under construction.

Dallas has the most projects scheduled to start in the next 12 months with 70 projects/8,076 rooms, followed by Atlanta with 61 projects/7,464 rooms, Los Angeles with 45 projects/6,894 rooms, Phoenix with 45 projects/5,472 rooms, and then the Inland Empire with 41 projects/4,173 rooms.

Nationally, early planning projects and room counts hit a new all-time high at Q1 with 2,434 projects/276,274 rooms. Year-over-year, the Top 25 markets in the U.S., as a group, have seen a 10% growth in early planning projects. The markets with the most projects in early planning at the close of the first quarter are again led by Dallas with 89 projects/9,995 rooms, then Nashville with 59 projects/7,182 rooms, Atlanta with 57 projects/6,500 rooms, Los Angeles with 56 projects/9,433 rooms, and Phoenix with 48 projects/5,473 rooms.

Brand conversion and renovation activity continues to be a significant focus in the lodging industry. In the first quarter of 2023, LE recorded record-high renovation and brand conversion totals of 1,953 active projects/253,533 rooms. The markets with the largest count of combined renovation and conversion projects are Atlanta with 41 projects/4,427 rooms, Houston with 38 projects/3,969 rooms, Chicago with 34 projects/4,572 rooms, Dallas with 31 projects/3,807 rooms, then San Diego with 28 projects/4,238 rooms.

New project announcements have been slow to return to pre-pandemic project counts. However, construction starts in the total U.S. pipeline rose 20% by projects and 30% by rooms YOY.

In the first quarter, Nashville has the highest number of new projects announced into the pipeline with 14 projects/1,847 rooms. Dallas follows with 11 projects/1,576 rooms, then Atlanta with 10 projects/1,146 rooms, Austin with 9 projects/1,201 rooms, and Phoenix with 9 projects/885 rooms.

LE is forecasting the top 50 markets to open 319 new hotels/42,743 rooms in 2023. LE analysts anticipate that new hotel openings will continue to rise within the top 50 U.S. markets, forecasting 327 new hotels/43,525 rooms to open through 2024.

In the 2023 forecast, analysts expect New York to lead with the highest number of new hotels to open with 43 accounting for 7,219 rooms, followed by Dallas with 14 new hotel projects/2,268 rooms, and the Inland Empire with 14 new hotels/1,377 rooms. For 2024, LE analysts forecast the Inland Empire to open the most new hotels, with 22 new hotel projects/2,191 rooms expected to open. Following the Inland Empire, Atlanta is forecasted to open 21 new hotel projects/3,356 rooms in 2024, then Dallas with 18 new hotel projects/1,973 rooms.