— U.S. Fall Edition —
LE’s New Business Opportunities
Your quarterly pulse on hotel development trends and LE news
U.S. Hotel Construction Pipeline Continues To Grow Year-Over-Year
In its fall report, buoyed by a steady consumer driven economy, analysts at Lodging Econometrics (LE) reported that the total U.S. construction pipeline stood at 5,704 projects/700,496 rooms, up 6% by projects and 8% by rooms year-over-year (YOY). Pipeline totals continue to climb closer to the all-time high of 5,883 projects/785,547 rooms reached in the second quarter of 2008; and are just 179 projects shy.
In its eighth consecutive quarter of growth, projects currently under construction stand at 1,729 projects/235,278 rooms, the highest count recorded since the second quarter of 2008. Projects scheduled to start construction in the next 12 months, currently 44% of all pipeline projects, was 2,479 projects/286,125 rooms, very close to the all-time high set in 2009. It’s up a whopping 16% in projects and 13% in rooms, YOY. Projects in the early planning stage stand at 1,496 projects/179,093 rooms.
But as a result of declines in commercial investment brought about by the indecision caused by the global slowdown and the prolonged tariff imbroglio. This is the second quarter in a row where construction starts have declined, an indicator that pipelines growth may top out in late 2020/2021.
Through the end of the third quarter, 704 new hotels with 81,111 rooms opened across the U.S. with another 299 projects/33,059 rooms expected to open by year-end. New hotel openings in the LE forecast for 2020 stand at 1,112 new hotels/122,702 rooms followed by 1,126 new hotels/130,447 rooms scheduled to open in 2021.
This quarter is the first time this cycle where supply growth at 2% has risen and drawn even with demand growth which has fallen to 2%. In 2019, 16 of the top 25 markets show occupancy declines YOY while 11 markets show Rev Par declines.
Marriott Leads with the Largest U.S. Hotel Construction Pipeline
In the Lodging Econometrics (LE) fall report for 2019, the franchise companies dominating the United States hotel construction pipeline are led by Marriott International with 1,484 projects/196,023 rooms, up 8% by projects and rooms year-over-year (YOY). Next is Hilton Worldwide currently at 1,373 projects/153,408 rooms and InterContinental Hotels Group (IHG) with 960 projects/98,139 rooms.
Pipelines are very strong for these companies. Both Marriott and Hilton’s total pipelines are near all-time highs, as are hotels under construction, with Marriott setting a record high.
The leading brands in the construction pipeline for each of the above three companies are Home2 Suites by Hilton with 415 projects/43,239 rooms, IHG’s Holiday Inn Express with 399 projects/37,974 rooms, and Marriott’s Fairfield Inn with 296 projects/28,662 rooms.
Other prominent brands in the pipeline for these franchise companies are Hampton by Hilton with 306 projects/31,739 rooms and Tru by Hilton with 303 projects/29,423 rooms; Marriott’s Towne Place Suites with 214 projects/21,908 rooms and Residence Inn with 203 projects/24,746 rooms; and IHG’s Avid Hotel with 182 projects/16,627 rooms and Staybridge Suites with 162 projects/16,915 rooms. These prominent brands combined comprise 44% of projects in the total pipeline.
Through the end of the third quarter, Marriott opened 193 new hotels/24,208 rooms accounting for 30% of all new hotel rooms that opened in the U.S. Hilton opened 198 new hotels/22,450 rooms accounting for 28% of newly opened rooms and IHG opened 104 new hotels/10,866 rooms accounting for 13% of rooms.
The LE forecast for new hotel openings in 2020 anticipates that Marriott will open 271 projects/33,945 rooms. Next is Hilton with 279 projects/30,010 rooms, followed by IHG with 176 projects/16,974 rooms.
In 2021, LE forecasts that Marriott will open 291 new hotels/37,873 rooms, Hilton is expected to open 263 new hotels/28,231 rooms and IHG to open 225 new hotels/22,564 rooms.
Los Angeles has the Largest U.S. Hotel Construction Pipeline
According to the third quarter construction pipeline trend report published by Lodging Econometrics (L.E.), the top five markets with the largest hotel construction pipelines by projects is led by Los Angeles with 161 projects/26,670 rooms. Next are New York and Dallas with 155 projects/26,605 rooms and 160 projects/20,020 rooms, respectively. Houston follows with 138 projects/14,130 rooms, and Atlanta with 137 projects/18,396 rooms.
The total pipelines for the top 25 markets account for 39.7% of all pipeline rooms and when built out represents a potential growth rate of 15.9% over all existing open and operating rooms (census). While overall supply growth has risen to 2.0% year to date in 2019, it is 2.5% in the top 25 markets and 1.7% in the other markets nationwide.
In the first three quarters of 2019, the U.S. opened 704 new hotels with 81,111 rooms. The markets with the highest number of new openings are New York City with 28 hotels/4,513 rooms, Dallas with 26 hotels/3,073 rooms, Houston with 18 hotels/2,285 rooms, Boston with 16 hotels/2,435 rooms and Nashville with 15 hotels/1,965 rooms. These 5 markets alone account for 15% of all new hotels that opened in the U.S. through the end of the third quarter.
For the last 3 years Dallas, with 92 hotels, opened the most hotels. New York with 90, Houston at 76, Nashville with 62 and Atlanta with 58 follow. All but Nashville show supply growth in excess of demand growth year-to-date in 2019.
The markets forecast to open the greatest number of new hotels in 2020 are New York City with 61 new hotels/8,283 rooms, Dallas with 35 new hotels/3,852 rooms and Los Angeles with 24 new hotels/3,370 rooms. In 2021, Dallas leads the forecast for new hotel openings with 43 hotels/5,283 rooms followed by Houston and Los Angeles with 39 new hotels/3,725 rooms and 27 new hotels/3,868 rooms respectively. In the next 3 years, markets with the highest number of new hotels (supply) expected to open are: New York with 123, Dallas 107, Houston 87, Atlanta 72 and Nashville with 67.