— U.S. Fall 2020 Edition —
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Your quarterly pulse on hotel development trends and LE news
The U.S. Hotel Construction Pipeline is down slightly in Q3 2020 but remains robust
According to the latest U.S. Hotel Construction Pipeline Trend Report by Lodging Econometrics (LE), the total U.S. hotel construction pipeline, at the end of Q3 2020, stands at 5,282 projects/655,026 rooms, down 7% by projects and 6% by rooms, year-over-year (YOY). As expected, the hotel construction pipeline is off more substantially in Q3 2020 as compared to Q2 2020. This is due largely in part to an acceleration of new hotel openings in Q2 2020 as a result of a cyclical high number of projects under construction in Q120 that were delayed and later opened in Q220. Secondly, new project announcements continue to be muted. Projects exiting the pipeline and moving to a cancelled or on hold status in Q320 stood at 191 projects/21,859 rooms.
Developers continue to closely monitor the impact the coronavirus will have on travel demand, how quickly a widespread vaccine will roll out, and the outcome of the U.S. presidential and congressional elections. It is expected that as these events and timelines provide more clarity for developers, they will begin to more confidently move forward with their development activity.
Projects currently under construction stand at 1,610 projects/216,136 rooms, down 7% by projects and 8% by rooms, YOY. Despite the decrease YOY, projects that are currently under construction continue to move forward towards their opening. New hotel openings continue to outpace projects moving to under construction. Projects scheduled to start construction in the next 12 months total 2,113 projects/246,528 rooms. Developers with projects scheduled to start construction in the next 12 months continue to adjust their construction start and opening dates, minimize carrying costs, and plan to open in a more robust operating environment. LE continues to track development timeline changes in its database. Projects in the early planning stage stand at 1,559 projects/192,362 rooms, an increase not only YOY but quarter-over-quarter as well.
Through the third quarter of 2020, the U.S. opened 599 new hotels with 68,712 rooms with another 326 projects/35,324 room anticipated to open by the end of 2020, totaling 925 projects/104,036 rooms. For 2021, LE expects another 960 projects/113,247 rooms to open.
68% of the projects in the United States Construction Pipeline belong to Marriott, Hilton and IHG
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 third quarter of 2020 are Marriott International with 1,390 projects/184,450 rooms, followed by Hilton Worldwide with 1,351 projects/155,626 rooms, and InterContinental Hotels Group (IHG) with 873 projects/89,375 rooms. Combined these three companies account for 68% of the projects and 66% of the rooms in the total pipeline; roughly the same percentage it’s been quarter-over-quarter throughout 2020.
Hilton’s Home2 Suites and IHG’s Holiday Inn Express continue to have the largest U.S. pipelines with 402 projects/42,036 rooms and 348 projects/33,351 rooms, respectively. Hampton by Hilton follows with 291 projects/30,140 rooms, then Tru by Hilton with 280 projects/26,991, and Marriott’s Fairfield Inn with 277 projects/27,005 rooms.
Other notable brands in the pipeline for each of these franchise companies are Marriott’s Residence Inn with 198 projects/24,549 rooms, SpringHill Suites with 172 projects/19,594 rooms, and TownePlace Suites with 195 projects/19,616 rooms, and then IHG’s Avid Hotel with 185 projects/16,583 rooms.
Through the third quarter of 2020, 599 new hotels with 68,712 rooms opened across the United States. Of those openings, Marriott, Hilton, and IHG branded hotels collectively accounted for 72% of these openings through Q3 ‘20. 173 of the hotels were Marriott brands, 170 were Hilton brandse, and another 86 were IHG brands. LE is expecting these top franchise companies to open another 202 hotels by the end of 2020.
For 2021, these leading franchise companies are forecast to open 655 new hotels adding 77,101 rooms to the census of open and operating hotels in the U.S.
At the end of Q3 2020, the Dallas market leads the U.S. Hotel Construction Pipeline
In the recent report released by Lodging Econometrics (LE), at the close of the third quarter of 2020, the top five U.S. markets with the largest total hotel construction pipelines are Dallas with 154 projects/18,592 rooms; followed by Los Angeles with 150 projects/25,188 rooms; New York City with 144 projects/25,147 rooms; Atlanta with 134 projects/18,670 rooms; and Houston with 109 projects/11,384 rooms. These top five markets account for 15% of the rooms in the total U.S. pipeline. Twenty of the Top 50 markets in the U.S. have more than 50 projects in their hotel construction pipelines.
There are currently seven markets in the United States that have 30 or more projects under construction in their pipelines. New York City continues to have the greatest number of projects under construction with 105 projects/18,453 rooms. Atlanta follows with 44 projects/6,483 rooms, and then Dallas with 42 projects/5,086 rooms, Los Angeles with 41 projects/7,278 rooms, Nashville with 33 projects/5,532 rooms, Orlando with 31 projects/5,107 rooms, and Austin with 30 projects/5,228 rooms. Of the top 50 Markets in the U.S., there are 20 markets, including the seven directly listed above, that have 20 or more projects under construction in the pipeline.
Despite the impact COVID-19 has had on operating performance, development, renovation and conversion activity in the lodging industry continues. This is evidenced by the number of hotels that opened in Q3. The top 50 markets in the U.S. saw 140 hotels /17,195 rooms open in Q3 ’20. The U.S. as a whole had 280 hotels/31,271 rooms open in Q3 ‘20. Additionally, there are 1,259 hotels/207,544 rooms under renovation or conversion at the end of Q3 ’20. Eleven of the top 50 markets in the U.S. have 10 or more hotels undergoing renovation or conversion activity currently.
*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.