— United States Edition —

Hotel Development Trends & Projections

As Travel Returns, U.S. Hotel Construction Pipeline Growth Follows

According to the recently released United States Construction Pipeline Trend Report from Lodging Econometrics (LE), the total U.S. construction pipeline stands at 5,220 projects/621,268 rooms at the close of 2022’s second quarter, up 9% Year-Over-Year (YOY) by projects and 4% YOY by rooms.

At Q2 ‘22, there are 965 projects/130,914 rooms currently under construction, down 17% YOY by projects and 18% YOY by rooms. Projects scheduled to start in the next 12 months, at 2,009 projects/232,163 rooms, are up 9% YOY by projects and 9% YOY by rooms. Projects and rooms in early planning reached a record high in the second quarter, standing at 2,246 projects/258,191 rooms, up 26% YOY by projects and 15% YOY by rooms. Continuing the trend seen over the past several years, the upscale and upper-midscale chain scales continue to lead the pipeline with 68% of projects concentrated in these two chain scales.

Following the substantial decline in travel during recent years, pent up demand and increased consumer sentiment and spending has led to record-high rates of travel and much improved hotel revenue over the last few months. Analysis of the hotel industry at the end of the second quarter suggests the outlook is positive and growth is expected to continue throughout 2022, albeit at a decelerated pace than initially expected. The industry’s ability to adapt to the constantly changing economic environment provides a positive outlook for hotel performance, and its eventual full recovery.

However, market volatility, persistent inflation, rising energy prices, elevated transportation costs, materials shortages, and supply chain backlogs continue to pose a challenge and slow the timeline to full recovery. Some hotels have noted a reduction in certain services and put a limit on the number of available room nights. Furthermore, although leisure travel has had a robust comeback in 2022, business travel is only slowly returning. To counterbalance the occupancy lag and capitalize on the strong leisure recovery, room rates have significantly increased with Average Daily Rates considerably higher than those recorded in 2019.

Even though the U.S. and the hotel industry are facing some economic challenges that can be expected to continue into the near future, corporate and personal balance sheets are reasonably strong, the U.S. banking system is healthy, and the planning of new hotel projects continues. Hotel investors and developers are still eager to move forward on projects and are being more mindful when approaching a deal. There were a total of 428 new projects accounting for 47,034 rooms announced into the pipeline in the second quarter of 2022. This number more than doubled YOY when compared to the second quarter of 2021 when 202 new hotel projects/25,653 rooms were recorded. Also of note, at Q2 2022, there are a total of 1,889 projects/237,420 rooms in the renovation or conversion pipeline in the U.S., with project and room conversions reaching an all-time high and increasing 66% YOY by projects and 35% YOY by rooms.

During the first and second quarters of 2022, the U.S. opened 247 new hotels with 28,116 rooms. LE is forecasting another 428 projects/50,322 rooms to open during 2022 for a total of 675 projects/78,438 rooms by year-end, representing a 1.4% increase in new supply. 733 projects/87,253 rooms are expected to open in 2023, representing a 1.5% increase in new supply. And, announcing for the first time, is LE’s new hotel openings forecast for 2024, for which analysts expect 848 projects/93,581 rooms to open with a 1.6% new supply increase.

Marriott International Projects Lead the U.S. Hotel Construction Pipeline at the Close of the Second Quarter

In the recently released Q2 2022 United States Construction Pipeline Trend Report from Lodging Econometrics (LE), the franchise company leading the United States hotel construction pipeline is Marriott International with 1,355 projects/167,034 rooms, up 4% by projects year-over-year (YOY). Next is Hilton Worldwide with 1,312 projects/147,780 rooms, an 8% YOY increase, and InterContinental Hotels Group (IHG) with 789 projects/79,701 rooms, up 2% by projects YOY. Current construction projects with these three franchise companies comprise 66% of the projects and 64% of the rooms in the total U.S. construction pipeline.

Marriott International has the most projects under construction and scheduled to start within the next 12 months, with 249 projects/33,398 rooms and 653 projects/80,395 rooms respectively. Hilton Worldwide has the most projects in the early planning stage of the pipeline, with 725 projects/78,879 rooms, these record high project and room totals for Hilton account for 32% of projects in the early planning stage.

The leading brands in the construction pipeline for the top three franchise companies at Q2 are Home2 Suites by Hilton with record high counts of 465 projects/47,825 rooms and Holiday Inn Express by IHG with 299 projects/28,598 rooms. Hilton’s Hampton by Hilton brands follow, with project and room highs of 281 projects/28,591 rooms. Marriott’s TownePlace Suites is next, with project and room record-highs of 270 projects/25,340 rooms, followed by its Fairfield Inn brand, with 235 projects/21,885 rooms.

During the first half of 2022, 247 hotels with 28,116 rooms opened across the U.S. Of these openings, Marriott, Hilton, and IHG branded hotels accounted for 70% with 172 new hotel openings and 20,365 rooms. Marriott opened 78 new hotels/9,475 rooms, Hilton opened 64 new hotels/7,901 rooms and IHG opened 30 new hotels/2,989 rooms. LE is expecting these top franchise companies to open another 248 hotels with 30,756 rooms by the end of this year.

LE analysts forecast for new hotel openings in 2022 anticipates that Marriott will open 169 new hotel projects/21,834 rooms, for a growth rate of 2.5%. Next is Hilton with 150 new hotel projects/17,698 rooms, for a growth rate of 2.3%, followed by IHG with 101 new hotel projects/11,589 rooms forecast to open for a growth rate of 2.7%. In 2023, Marriott is expected to open another 181 new hotel projects/21,850 rooms for a growth rate of 2.4%. LE predicts Hilton will open 154 new hotel projects/18,974 rooms, for a 2.5% growth rate by year-end 2023, while IHG is expected to see a 3.6% growth rate in 2023, with 153 new hotel projects, accounting for 15,650 rooms. In LE’s forecast for new hotel openings in 2024, Marriott is forecast to open 227 projects/26,807 rooms for a growth rate of 2.9%. Hilton is expected to open 189 new hotel projects/20,048 rooms, for a 2.5% growth rate by year-end 2024, and IHG is forecast to open 202 new hotel projects, accounting for 19,781 rooms for a 4.4% growth rate in 2024. (Note: all growth rates are by rooms)

For the Fourth Consecutive Quarter, Dallas Leads the U.S. Hotel Construction Pipeline at the Close of Q2 2022

In the recently released Q2 2022 United States Construction Pipeline Trend Report from Lodging Econometrics (LE), at the close of the second quarter, the top five markets with the largest hotel construction pipelines are Dallas, with a record-high count of 173 projects accounting for 20,707 rooms; Atlanta, with 140 projects/18,131 rooms; Los Angeles, with 124 projects/20,365 rooms; New York, with 113 projects/19,238 rooms; and Phoenix, with 108 projects/14,964 rooms.

According to LE analysts, many major markets and popular U.S. tourist destinations have seen a significant increase in demand throughout the first half of the year. Driven by robust leisure travel, group, and international travel, these markets are reporting the highest occupancy rates since the pandemic began in early 2020. Encouraged by 2022’s upward trend in hotel performance, owners, management groups, developers, and investors are moving forward with development plans as evidenced by increasing counts at every stage of construction.

The five top markets with the most projects currently under construction are New York City, with 78 projects/13,063 rooms; Atlanta, with 25 projects/3,905 rooms; Dallas, with 25 projects/3,725 rooms; Phoenix, with 23 projects/4,955 rooms; Los Angeles, with 22 projects/3,606 rooms. Collectively, these five markets account for 22% of the total number of rooms currently under construction in the U.S. At Q2 ‘22, Atlanta has the most projects scheduled to start in the next 12 months, with 62 projects/8,020 rooms. Behind Atlanta, are Dallas, with 55 projects/6,465 rooms; Phoenix, with 49 projects/5,968 rooms; Houston, with 45 projects/4,619 rooms; and Los Angeles, with 43 projects/6,715 rooms. Dallas has the most projects in early planning with 93 projects/10,517 rooms. Los Angeles follows, with 59 projects/10,044 rooms. Next is Atlanta with 53 projects/6,206 rooms; Orlando, with 44 projects/7,640 rooms; and Washington, DC with 40 projects/5,659 rooms.

In the second quarter of 2022, Dallas recorded the highest count of new projects announced into the pipeline with 16 projects/1,654 rooms. Atlanta followed with 11 projects/1,206 rooms, then the Inland Empire, CA market with 11 projects/1,113 rooms, Houston with 9 projects/929 rooms, and Charlotte with 9 projects/916 rooms. LE recorded a combined renovation and conversion pipeline total of 1,889 projects with 237,420 rooms for the U.S. The markets with the largest combined number of renovations and conversions are Houston with 42 projects/4,666 rooms, Atlanta with 39 projects/5,246 rooms, Chicago with 34 projects/4,908 rooms, Dallas with 30 projects/3,785 rooms, and San Diego with 28 projects/4,753 rooms.

Twenty-six percent of the new hotels forecast to open between now and 2022 year-end are concentrated within seven markets. These markets are New York, Austin, Atlanta, Los Angeles, Nashville, Detroit, and Inland Empire. At Q2, the top 25 markets in the U.S. are forecast to open 46% of the rooms expected to open by year-end.

Of the top 50 markets in the U.S., the New York City market is forecast to open 58 projects/8,329 rooms by year end, followed by Austin with 25 projects/3,291 rooms, Atlanta with 22 projects/2,598 rooms, Los Angeles with 18 projects/3,191 rooms, and then Nashville with 17 projects/2,630 rooms.

The top 50 markets saw 151 projects/18,966 rooms open in the first half of 2022. LE is forecasting these same 50 markets to open another 252 projects/33,948 rooms in the second half of the year, for a total of 403 projects/52,914 rooms by year-end 2022. In 2023, 366 projects accounting for 46,176 rooms are forecast to open within the top 50 markets, for a 1.7% growth rate and in 2024 LE analysts forecast 402 new hotel projects, accounting for 47,065 rooms to open, for a 1.7% growth rate.