— U.S. Spring Edition —
LE’s New Business Opportunities
Your quarterly pulse on hotel development trends and LE news
The U.S. Hotel Construction Pipeline remains robust through the first half of 2020, despite pandemic.*
Analysts at Lodging Econometrics (LE) report that at the close of the second quarter of 2020, the total U.S. hotel construction pipeline stands at 5,582 projects/687,801 rooms, down a mere 1% by projects and rooms, Year-Over-Year (YOY). Remarkably, despite some project cancelations, postponements, and delays, there has been minimal impact on the U.S. construction pipeline. Contrary to what is being experienced with hotel operations, the pipeline remains robust as interest rates are at all-time lows.
Projects currently under construction stand at 1,771 projects/235,467 rooms, up 3% and 1% respectively, YOY. Projects scheduled to start construction in the next 12 months total 2,389 projects/276,247 rooms. Projects in the early planning stage stand at 1,422 projects/176,087 rooms. As expected, developers with projects under construction are still experiencing some opening delays. However, projects continue to move forward, albeit with extended timelines. As was the case at the end of the first quarter, developers with projects scheduled to start construction in the next 12 months continue to monitor current events and make adjustments to their construction start and opening dates.
In the first half of 2020, the U.S. opened 313 new hotels with 36,992 rooms. Additionally, there were 481 new projects with 56,823 rooms announced into the pipeline in the first half of 2020. Of those totals, 169 new project announcements with 20,359 rooms occurred in the second quarter. With franchise development staff largely working from home, non-essential travel halted, and with the on-going pandemic, the ability to get a new development deal signed has slowed. This has resulted in a 53% decrease in new project announcements compared to the second quarter of 2019 when 359 projects/44,895 rooms were recorded.
With the arrival of summer, the country has begun to see an uptick in domestic leisure travel. As a result, more and more hotels are re-opening, and many others have begun to move-up renovation plans and/or are repositioning their property with a brand conversion. In the first half of 2020, LE recorded 1,465 active renovation projects/314,043 rooms and 1,196 active conversion projects/136,110 rooms throughout the United States.
Marriott, Hilton, and IHG continue to dominate the U.S. Hotel Construction Pipeline at Q2’20 close*
In the recently released quarterly United States Construction Pipeline Trend Report from Lodging Econometrics (LE), the franchise companies with the largest construction pipelines at the end of the second quarter of 2020 are Marriott International with 1,487 projects/195,952 rooms, followed by Hilton Worldwide with 1,395 projects/160,078 rooms, and InterContinental Hotels Group (IHG) with 920 projects/94,499 rooms. Combined these three companies account for 68% of the projects in the total pipeline; roughly the same percentage as the Q1’20 close.
Hilton’s Home2 Suites and IHG’s Holiday Inn Express continue to be the most prominent brands in the U.S. pipeline with 415 projects/43,336 rooms and 371 projects/35,539 rooms, respectively. Hampton by Hilton follows with 304 projects/31,365 rooms and then Marriott’s Fairfield Inn with 302 projects/29,251 rooms. These four brands combined represent an impressive 25% of the projects in the total pipeline.
Other notable brands in the pipeline for each of these franchise companies are Tru by Hilton with 298 projects/28,863 rooms; Marriott’s Residence Inn with 208 projects/25,520 rooms, SpringHill Suites with 184 projects/20,842 rooms, and TownePlace Suites with 207 projects/20,802 rooms; and then IHG’s Avid Hotel with 189 projects/17,090 rooms.
In the second quarter of 2020, LE recorded 580 conversion projects/66,852 rooms. Of these conversion totals, Best Western dominates with 150 conversion projects/13,482 rooms, alone claiming 25% of the conversion pipeline by projects. Following Best Western is Marriott with 79 projects/13,721 rooms, Hilton has 69 projects/11,279 rooms, and IHG recorded 50 projects/5,382 rooms. Best Western and these three franchise companies combined account for 66% of all the rooms in the conversion pipeline across the United States.
In the first half of 2020, 313 new hotels with 36,992 rooms opened across the United States. Of those openings, Marriott, Hilton and IHG collectively opened 69% of the hotels. Marriott opened 90 hotels 11,036 rooms, Hilton opened 82 hotels/8,728 rooms, and IHG opened 44 hotels/4,190 rooms.
For the fourth consecutive quarter, Los Angeles leads the U.S. Hotel Construction Pipeline at the close of Q2’ 20*
In the recent report released by Lodging Econometrics (LE), at the close of the second quarter of 2020, the top five U.S. markets with the largest total hotel construction pipelines are Los Angeles, leading for the fourth consecutive quarter, with 163 projects/27,415 rooms; followed by Dallas with 158 projects/19,314 rooms; New York City with 151 projects/26,302 rooms; Atlanta with 135 projects/18,634 rooms; and Houston with 122 projects/12,486 rooms. Despite these top five markets being located in states that have been heavily impacted by COVID-19, combined, they still account for 15% of the rooms in the total U.S. pipeline and, with the exception of Houston, have pipelines that remain steady and primarily unchanged quarter-over-quarter.
New York City continues to have the greatest number of projects under construction, with 106 projects/18,354 rooms. Los Angeles follows with 48 projects/8,070 rooms, and then Atlanta with 48 projects/6,604 rooms, Dallas with 46 projects/5,344 rooms, and Nashville with 37 projects/6,597 rooms. These five markets collectively account for nearly 20% of the total number of rooms currently under construction in the U.S.
According to LE’s research, many hotel owners, who have capital on hand, are taking this opportunity of decreased demand to upgrade and renovate their hotels or redefine their hotels with a brand conversion. In the second quarter of 2020, LE recorded a combined renovation and conversion total of 1,276 active projects with 217,865 rooms for the U.S. The markets with the largest combined number of renovations and conversions is Chicago with 28 projects/4,717 rooms, Los Angeles with 26 projects/4,548 rooms, New York City with 22 projects/8,817 rooms, Washington DC with 21 projects/4,850 rooms, and Atlanta with 19 projects/3,273 rooms.
Despite the impact COVID-19 has had on operating performance, development in the lodging industry continues. In the first half of 2020, Dallas recorded the highest count of new projects announced into the pipeline with 18 projects/2,018 rooms. Washington DC followed with 14 projects/1,978 rooms, then Phoenix with 13 projects/1,397 rooms, Miami with 10 projects/2,472 rooms, and the Florida Panhandle with 9 projects/1,178 rooms.
*COVID-19 (coronavirus) has had an unprecedented impact on the country and the hospitality industry. LE’s market intelligence department has and will continue to gather global hotel 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 the pandemic will have on the lodging industry. We will have more information to report in the coming months.